Home purchase prices lack stabilisation 4 consecutive years as home purchase prices have not stabilized for 4 years and experts do not predict that the situation will change in the short term.
At the start of the pandemic, most institutions and real estate experts predicted that house prices would soon be affected by the coronavirus crisis, predicting that mobility restrictions and the paralysis of economic activity would slow down the interest of buyers and force their owners to accept lower offers. However, that prediction came to pass only in part.
Thus, housing sales were affected by the pandemic, especially during the month of May last year, in which the mobility of the population was severely restricted to avoid contagion of the virus. In fact, the sale and purchase market closed 2020 with 17.7% fewer transactions throughout the year, its largest drop since 2009 and the lowest number of real estate transactions since 2016.
And yet, prices did not fall as expected by the sector. In fact, according to the figures of the Housing Price Index prepared by the National Institute of Statistics, the price of free housing increased by 2.1% on average in 2020, its lowest increase since 2014 although accumulating its seventh consecutive year becoming more expensive, with an advance of 6.5% in new housing and 1.4% in second-hand housing.
"It is a reality that, since 2017, the price of housing in Spain has not managed to stabilize at any time, being common increases and decreases from one quarter to another. In addition, it should be noted that since the end of 2018, the price of housing had an upward trajectory until Covid-19 arrived", says the CEO of Housell, Guillermo Llibre, specifying that transactions and prices vary by area and make it difficult to make general valuations.
Home purchase prices lack stabilisation 4 consecutive years
"There are macro aspects, such as interest rates and unemployment rates, which are two of the great indicators on the market for buying and selling housing. In addition, there are other minor aspects that always border on: foreign demand and rents that mark a limit on rent versus purchase," says Llibre, who highlights that the market faces a shortage of supply that does not foresee that it will be solved throughout this year, which could drag prices upwards.
Therefore, the CEO of Housell believes that housing prices will follow an unstable trend. "With the end of the pandemic on the horizon, a certain pace has been recovered in the real estate market at the transactional level and, for the moment, the sale prices of housing, although stable, seem to continue to rise little by little. The latest data show this upward trend, but we believe it will continue to be a somewhat irregular trend," he stresses.
Meanwhile, Comillas ICADE professor and real estate expert Leandro Escobar does not agree with Guillermo Llibre's opinion. "Once again, it should be noted that the generalization of the different submarkets makes us lose nuances, but, in general, it can be said that sales prices have remained relatively stable over the last 4 years, except, obviously, for the fluctuations due to the outbreak of the pandemic," he explains.
Home purchase prices lack stabilisation 4 consecutive years
Escobar points out that the main official figures support his claims. "This is corroborated by both the time series of the National Institute of Statistics, based on the prices of sale of registered homes provided by the General Council of Notaries, and those of the Ministry of Public Works, based on valuation values provided by valuation companies", adds the expert.
For her part, Maria Matos, director of research, Fotocasa, alludes to the figures compiled by the real estate portal to define to what extent have stabilized the price of the purchase and sale of housing in the last few years, which notes that have changed its evolution not only as a result of the pandemic, but also by changes of cycle latest in the market.
"In December 2019, our Fotocasa Real Estate Index already detected a change in trend, we saw how the price of housing fell for the first time after 38 consecutive months of increases since October 2016," says Matos. "It was the first natural decline in the market in 3 years, so we could say it was the first attempt of the market to stabilize," he adds.
Home purchase prices lack stabilisation 4 consecutive years
"From there, during 2020 we witnessed year-on-year declines of a maximum of 2.4%, until November, which was when the price of housing rose by 0.7% influenced by the awakening of interest in changing housing," says the director of Studies of Fotocasa, pointing out that the price increased slightly last December
"We are now in a growth content, in which prices are moderating and probably begin to detect drops soon," says María Mato, which clarifies that the experts of the real estate portal does not provide for large corrections to the low housing prices in the property, since it clarifies that the current level is 36% below the maximum price.
Meanwhile, Iñaki Unsain, president of the Spanish Association of Real Estate Personal Shopper (AEPSI), details the recent evolution of home ownership prices. "We have had from 2007 to 2013 a spectacular fall in prices every year and many times of 2 digits, from 2014 to 2018, were 5 years of constant growth, and then we enter 2019 with a fall of 1.9% and in 2020 of 2.7%, in the case of Barcelona, but it is extrapolable to the national market," he says.
In addition, she agrees with María Matos in pointing out that the change in trend occurred in the year prior to the pandemic. "I detected from 2019 that we had not reached a price drop, but already a exhaustion of the increases of the last 5 years, entering a period of certain price stabilization", assures the president of AEPSI.
Home purchase prices lack stabilisation 4 consecutive years
Looking ahead, Iñaki Unsain foresees further price increases. "In 2021 we are in a very flat phase and in my opinion we will close the year with a fall or a minimum rise in prices and in 2022 there may be a rebound due to the arrival of European funds, by the reactivation of the economy, because people will buy again because there is a very important saving of individuals who for a long time have not been able to consume", explains the expert.
Unsain therefore believes that when the situation caused by the pandemic is cleared and consumers can spend on what they have not been able to because of the coronavirus, the trend will stabilize upwards. "The moment they remove this uncertainty from us, purchasing decisions will be reactivated, demand will increase and, as demand increases, prices will surely have an upward trend," he says.
"I would anticipate that in 2022 and 2023 we will see price increases again, with which we have had 3 years of some stabilization with increases or decreases the minimum and from 2022, if there are no new waves, pandemics and disasters of this type, and the economy sets in motion, we will see price increases from 3% to 6%," says the president of AEPSI.
Home purchase prices lack stabilisation 4 consecutive years
The Director of Studies Pisos.com, Ferran Font attributes the instability of housing prices to changes in regulations, both mortgage and rental. "The evolution of the sale of mortgages was growing from 2014 to 2018, which was around 10% since 2015 and did not fall from there until 2018, but we reached 2019 and due to the impact that the mortgage law had, it was the first year in which transactions fell after 4 years growing," he explains.
Meanwhile, in 2020, Font alludes to the combined impact of the pandemic, the rent regulation in Catalonia and the price limits that have been raised at the state level and that it foresees that they will not be applied. "It is not a positive situation for the market, which needs stable legislation, not only at the level of family savings but also interest rates for people to make such an important decision as investing or buying a home," he details.
The Director of Studies Pisos.com it also states that this phenomenon occurs on a global scale. "It is not something exclusive to Spain, but in many Western countries housing legislation is partisan and political, that has consequences because there is no long-term policy," adds Font, who calls for legal stability to promote the recovery of the real estate market.
In addition, Ferran Font also points to the impact of Brexit and highlights that the exit of the United Kingdom from the European Union has had an impact on the foreign nationality that buys the most in Spain. However, it is also optimistic about the adaptability of the sector. "The market has shown its resilience during 2020 and has made very important changes, especially in terms of technological adaptation and the needs of homebuyers," he says.