Boom in sales and record brick prices. These are the characteristics that best define the last two years in the real estate sector in Europe. While 2019 saw an annual increase in home values of around 4%, growth during the first quarter of 2022 approached 10%; the highest rate since the beginning of 1991. This is detailed in the latest monthly report of the European Central Bank, where they also warn of the possibility that the price of housing will fall in the euro zone during the next two years, as a consequence of the increases of interest rates announced by the same entity in July and September of this year (and those that remain to be announced). Will prices also drop in Spain?
"Making predictions in a context of uncertainty is difficult, but a priori, what is expected in the short term is that the price of housing will moderate the growth that it has been showing up to now," explain the specialists at HelpMyCash.com, a dedicated website to the financial and real estate comparison. The lack of stock is the main cause of this theory.
According to a study by Atlas Real Estate Analytics, the housing stock peaked in October 2020, when there were around 700,000 homes listed. From then on, the strong absorption rates caused a downward trend in available housing, reaching 640,724 units in July 2022.
And it is that, during the pandemic, the excess savings accumulated by families and the low interest rates facilitated by the monetary policy of the European Central Bank allowed many Spaniards to buy a home. This created a tension between supply and demand that caused prices to rise.
“If demand contracts now, as a result of the rise in interest rates, the impact will not be like in 2008, when there was excess supply. The lack of properties for sale could soften the effect on the price of housing”, point out the experts at HelpMyCash.
Added to this is the scarcity of new construction, affected by the high costs of construction. According to the latest IMIE report from the Tinsa Appraisal Society, work start visas issued by the Association of Quantity Surveyors plummeted 14.8% year-on-year in May.
The rules of the game in the real estate market are changing. According to HelpMyCash.com specialists, a lengthening in the average sales time can be expected in the coming months and an adjustment in the prices of publications on real estate portals.
"Usually, a home is published for the first time at a price that is between 5% and 15% higher than the final value at which the property is sold," experts say. This is due to several factors, but the emotional value that owners place on the asset is the most common.
“A property that is listed for a higher price than what the market dictates usually takes longer to sell than one that is adjusted to what buyers are willing to pay. Bearing in mind that sales times may be longer in the coming months, making an accurate assessment and defining a pricing strategy is increasingly important”, they specify from HelpMyCash. And they add that the intervention of a real estate agent gains relevance to bring the operation to a successful conclusion in this new context.
