REAL ESTATE | Housing sector shakes off recession specter, prepares for new ‘boom’

first lower interest rates carried out by the European Central Bank (ECB) in June last year from 4.5% to 4.25%, had collateral in the housing sector: various analytical houses, financial institutions, appraisers and firms in this sector. they are beginning to sense the end of the recession period that the market has been recording since the ECB started raising rates in March 2022. The latest was a North American rating agency. Standard & PoorWhat prices are forecast to fall by 0.3% in 2024 and in his latest report revised its growth forecast to around 4% for the yearIt also raised its forecasts for 2025 from 1.5% to 3%, for 2026 from 2% to 2.4%, and is keeping its 2027 forecast at 2%. That represents a cumulative gain of 11.4% over those four years.

According to the National Statistics Institute (INE) House Price Index, from January 2022 to March 2024 (latest available data) House prices in Spain rise by 10%despite the tightening of monetary policy. The reason, according to most experts, is the low supply on the market and high demand, which causes price tensions. In addition, at the macroeconomic level, Spain is among the eurozone economies with the best growth rates, and employment is at a historical maximum, which prevented the market from cooling.

Despite the growth, the pace of growth measured on an annualized basis has been slowing in recent months. However, if the ECB activates a new rate cut, it will lead to lower mortgage prices. “If the forecasts for de-escalation of interest rates come true and two more cuts are made in the second half of the year, We will see once again how access to housing improves. when the conditions for access to a mortgage loan are reduced and how Demand that was kept waiting will return to the market with forcealso conditioned by assistance for the purchase of real estate in the form of state guarantees, which will play a key role in the second half of the year,” the real estate portal emphasizes in one of its latest studies.

This situation also caused BankinterThe company that gave the worst forecasts for house prices has revised its estimates upward: in its June report raised its growth expectations to 3%, up from the negative 2% previously reported.. What reasons do you give? Supply shortages, sharply rising rents, falling interest rates, and the strength of the labor market. The latter was also considered by S&P, which noted: “The labor market has proven more resilient than we expected.This meant that house prices were better than we expected and that mortgage lending recovered faster than in previous cycles.

A rebound in home buying and selling?

In the last two years, following the rate hikes, the sector’s dynamism has declined, although prices have continued to rise. Between January and May, INE recorded 249,124 transactions, 4.15% less than in the same period in 2023 and 8.72% less than in 2022. CaixaBank Research, the organisation’s economic analysis firm, stresses that despite the setbacks, “this is a high level of activity, given that it remains 34% above the level of activity that existed before the pandemic.” Until April, the figures were an improvement on those recorded in the same months of 2023, but the data for May were particularly negative..

Despite this, Sociedad de la Tasación, one of the main housing valuation firms in the country, believes that the market could face a change: the first quarter of 2024. This potential turning point in the housing market at the beginning of the year may now give way to the second half of the recovery. and the emerging expansion of real estate and mortgage lending activities.”

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Beatriz Toribio, secretary general of the Spanish Association of Developers and Builders (APCE), believes that in the short term, the reduction in funding will “create even more tension in prices” due to an imbalance in supply and demand: “Many potential buyers and investors postponed the purchase decision until Expect rates to ease in the second half of the year.“.

The Spanish Association of Value Analysis (AEV) also found a change in trend: the volume of mortgage valuations increased by 4%, and their total amount by 7.5%. In addition, the aforementioned appraiser’s confidence index, based on the perceptions of more than 600 professionals, also registered an improvement, reaching 52 points out of 100 at the end of the second quarter of 2024. “It exceeded the break-even point (50) for the first time since September 2022.“thus confirming the restoration of optimism on the part of the real estate sector,” they explained at a meeting with the media last week.