Real Estate Slowdown: Home Sales Will Fall More Than 26?%

The real estate sector is leaving behind its special period of fat cows. After the turbulence it had to face after the 2008 crisis, Brick achieved record numbers fourteen years later. In 2022 housing demand exceeded all expectations of experts, with about 650,000 sales, which represents an increase of almost 15?% compared to the previous year and the highest figure since 2007.

But for this year, they paint rough. According to the study The Spanish real estate sector: 2022 balance sheet and 2023 perspectivesfrom CaixaBank Research, 2023 About 480,000 house sales will be formalized in Spain, which will be equivalent to a drop of 26?%. There are several factors behind this decline, explains Judit Montoriol Garriga, author of the study. Firstly, the temporary factors that boosted demand for real estate in 2021 and 2022 have disappeared: «During those years, there was an important change in preferences regarding living place It refers to the fact that stored savings coincided, two issues that led to an increase in purchases,” he explains. But things have changed: «In 2023, lower demand is expected due to the rise in interest rates and lower growth in the real gross disposable income of households. Investor demand, for its part, will take a stand Wait and see [espera y observa]”, summarizes Montoriol.

Not all sectors will suffer in the same way. The expert predicts that the decline will be concentrated primarily on used cars. In fact, those new builds will be retained thanks to the high percentage of pre-sale promotions that are currently under construction and the relative scarcity of this type of housing that exists in our country: «The strong recovery in the number of sales in 2022 is entirely due to the second-hand market. 17.7% more used properties were sold than in 2021. On the other hand, the number of new apartment sales remained in a similar range as the previous year: with 117,000 homes and 2.6% more than in 2021.»summarizes the CaixaBank expert.

Limited offer

This is the Spanish problem The housing offer is still very limited and insufficient to cover the needs that exist with regard to demographic development which the country is experiencing. The numbers confirm this. Since the number of new building permits — which amounted to 109,000 homes in 2022— was well below the net creation of households: 210,000. And this is not a situation that was recorded only in the past year, because the scene was repeated in 2020 and 2021: “A factor that could help the recovery of supply is the recent slowdown in the rate of movement of construction costs. . They rebounded strongly in the first half of 2022, with a peak of 19.5% y/y recorded in May. Since then, the pace of progress has been slightly more subdued and we anticipate that cost pressures will tend to moderate given the recent evolution of energy prices and industrial metal prices on international markets, which have fallen sharply. marked from mid-2022, despite the recent recovery due to China’s reopening.

Despite the fact that the sector already predicts a slowdown in demand, the context will not be significantly felt in prices: «Our forecast is that the price will stagnate. We won’t see the growth in apartment prices that we’ve seen in recent years, but there won’t be a sudden drop either,” sums up Judit Montoriol. Once again, the expert explains, the market will also progress at two rates in terms of prices: «The evolution will be more positive (that is, it will remain the same or even experience an increase) in the most sought-after locations, such as the centers of large cities and tourist areas. As housing type, we predict a differentiated evolution, in a way that the used one will be the most affected, while we expect better behavior from the new one, due to its relative scarcity and high demand”, he summarizes.

Differences compared to 2008

spirit of brick crisis This still weighs heavily on the memory of the Spaniards. However, experts say that the current situation does not at all resemble that of the past. “The turbulence that the financial markets have been experiencing since mid-March is a warning of the risks that can arise in the context of a rapid rise in interest rates and that, if they persist over time or worsen, something that is not part of our baseline scenario, could have an effect on the economic outlook and real estate .”

very different situations

But the future does not look as bleak as it did then: “The sector starts from a much more solid situation than in the previous cycle in order to be able to overcome the context. 2008 we had a completely unbalanced market, where the supply of apartments is That was twice the number of homes that were created. There was an overproduction of new properties, which reached 800,000 per year, while now we are at 100,000, which is an eighth,” says an expert from CaixaBank Research.