Employment and immigration boost real estate outlook

Despite the decline in transaction volumes, stress from a lack of supply and a growing number of homes will support prices.

Unexpected labor market resilienceAdding to the forecast for housing construction in the coming years due to immigration and youth emancipation allows for improved real estate market forecasts for 2024 and 2025, whichand although they were not entirely bad, they indicated a profound moderation of activity. The latest macroeconomic data still predicts a contraction in buying and selling, albeit much less than expected and what is in fact still a return to market normality after 2022 was an atypical year to the extent that it The best year in real estate since 2007.

This is the forecast of CaixaBank Research, the banking institution’s research center, which indicates a clear improvement compared to previous forecasts. The forecast was made yesterday by Judith Montoriol, senior economist at CaixaBank Research, at the ninth edition of EFIMAD, dedicated to real estate finance. In particular, by 2024, according to the center’s estimates, the price will increase by 3.5%, and the number of sales will be 550 thousand. 7% less than the 592,000 CaixaBank estimates in 2023., in the absence of publication of final data. The 2023 figure will also be 10% lower than the 2022 figure, a noticeable decline in just two years, which coincides with two facts: first, household savings have fallen compared to the months since the pandemic, making it less expensive to buy a home. feasible than in 2021 and 2022; and second, rising interest rates have made bank financing very expensive.

In 2025, the number of transactions will stabilize and actually increase very little, while house price growth will experience a further slowdown, with annual growth at 2.5% by then. For such a static market, growth in 2024 and 2025 may be too noticeable. There is an explanation, and it lies in the mismatch between supply and demand. On the demand side, what has already been mentioned: a better-than-expected labor market and creation of houses, the number of which will exceed 200,000 per year by 2030.

Except, one would expect home buying incentives to have some effect. In this sense, yesterday the Minister of Housing and Urban Agenda Isabel Rodríguez announced that at the end of the month two measures will be approved to facilitate access to housing: a line of 20% guarantees for young people and families with minors. responsible for the payment of the down payment for the purchase of a house and the ICO credit line of 4 billion euros for the public-private promotion of affordable housing. To this we must add, as Caixabank has already predicted, that before the summer the European Central Bank will reduce its monetary policy for the first time in two years, with a reduction in interest rates. The reduction, which is already provided for by Euribor, will lead to cheaper mortgage financing.

And while some demand has suffered due to rising prices and rising mortgage prices, there is another that has suffered less: which consists of foreign buyers and investors, which usually do not resort to bank financing and therefore do not notice the increase in rates. According to Apartments.com, in 2023, 35% of sales transactions took place without a mortgage. The weight of cash purchases has increased in recent years. According to CaixaBank, this is due to an increase in the share of second home buyers who, since they are selling their previous home, do not need financing; and foreigners who, because they have greater purchasing power than nationals, are also less likely to take out a mortgage.

The biggest concern is supply, both in the form of secondary housing and new construction. Firstly, Post-pandemic buyer gluttony has consumed a significant chunk of real estate inventory. on sale; Secondly, the organization estimates that 115,000 new construction visas will be issued in 2024 and 125,000 in 2025. also quite tense.

This problem of housing shortage was outlined yesterday at the same forum by the Madrid developers association Asprima: according to their calculations, the Spanish real estate market ended 2023 with a deficit of 200,000 homes. Carolina Roca, President of Asprima, assured that this problem has been building up over the past decade. And before the brick crisis of 2008 there were no problems with housing construction, in fact there was overproduction, but the shortage of land and labor led to the current problem of shortage of new housing. Promoters emphasize that, in addition to the lack of land, It is necessary to reduce bureaucracy and facilitate construction financing..

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