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Will home values ​​go up in 2022 and 2023?

The residential sector faces innumerable challenges in the coming months. The economy is preparing for a rise in interest rates, which could mitigate the high existing inflation; all this in the midst of a global supply crisis and a war crisis that stalks the European region.

In this climate of uncertainty, the residential sector could slow down its growth, but without entering a downward trend. The main reasons for this cooling in the residential segment is an environment of higher financing costs and the lower savings rate of families, as a result of high inflation.

House prices do not reflect bubble symptoms

So far, the effort rate of families, that is, the percentage of salary that they allocate to housing, is below the 35% threshold. At the end of 2021, it was at 33%, although it may rise slightly during this year. However, it is far from the figures that were reached in the real estate bubble, where it exceeded levels of 50%.

In addition, the indebtedness undertaken by families continues at levels that the market calls healthy. The average loan to value of mortgages is 65% and only 10% of them exceed 80%, minimum levels of 20 years. Additionally, in recent years, most of the loans linked to housing signed are at a fixed rate, which represents perfect coverage in a climate of interest rate increases by central banks.

In 2021, more than 566,000 properties were transacted, something unusual since the previous recession. These levels were last reached in 2008. Despite the slowdown, in 2022 and 2023, they estimate that sales will be above half a million.

The price of housing in Spain

The average price of housing in Spain stands at 1,823 euros per square meter; based on transaction data, collected by Brains Real Estate’s Real Estate Big Data platform. This represents 9.6% below the maximum price reached in the real estate bubble, in the first quarter of 2008.

Specifically, new construction is 14% higher in cost than second-hand housing; a trend that is expected to increase in the coming years. However, the number of new property sales continues to be between 11% and 15%.

In the case of rent, it is at a maximum, with a tireless rise since 2015. Renting a home costs an average of 10.5 euros per square meter per month, compared to the 6.8 euros it cost at the beginning of 2015.

The average gross return of those investors who opt for residential rentals is 6.6%; according to Brains Real Estate.

Source: Brainsre News

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Learn about the trends that characterize the real estate market in 2022

Interest in real estate is picking up, both in coastal resorts and big cities. The beginning of 2021 has been quite challenging. After the first year of the coronavirus pandemic, the downward trend in foreign investment in Spain seemed to have continued.

However, an effective vaccination campaign opened up more optimistic prospects, which contributed to the general economic recovery in Spain, especially in the real estate sector with an increasing number of property hunters buying investment apartments in Spain.

Rising property prices

The reactivation of the real estate market has caused an increase in real estate prices in the main tourist centers of the region. But this is not a problem for foreign investors. They tend to buy properties that fit their requirements without paying much attention to their price tags. In fact, this is what contributes to the increase in property prices in general.

This is a trend that we are also seeing among local investors who are looking for a home not only for vacations, but also for long-term living or even telecommuting.

What will happen in the short and long term?

Since the beginning of 2021, a moderate recovery in the real estate market has been observed, which will undoubtedly continue in the coming months. There has been a growth in interest in buying or renting a second home, both by foreigners and locals. For this reason, investors will look for homes that allow you to work many miles away from your office.

In 2022, an increase in home sales is expected in the tourist regions of Spain. According to a report prepared by CaixaBank Research, in 2022 a tangible increase in home sales is expected in the tourist regions of Spain, where a significant proportion of buyers are foreigners.

In the midst of the Covid-19 pandemic, the number of purchases and sales of residential real estate in these regions decreased by 17.8%, and although the recovery is not yet fast enough, there is much to be said for a return to the previous . level.

Spain-Real.Estate experts believe that in the foreseeable future, the demand for houses and apartments in Spain by foreigners will return to its previous level, which is already noticeable by the number of search queries on the Internet. The expected introduction of a residence permit in Spain for “digital nomads” is also expected to increase the demand for houses and apartments.

What characteristics will mark the sector?

Looking ahead to 2022, everything indicates that the progressive economic recovery, together with other factors such as inflation, the supply crisis and the new Housing Law, could draw a new roadmap in the residential real estate market. On the occasion of the arrival of the new financial year, Solvia experts identify the main characteristics that will mark the sector:

Stabilization of sales. The Spanish continue to opt for the purchase and this has been reflected in the number of operations in 2021. This year, the trend will continue. This rebound will not be as sharp as that of recent months, registering a more moderate increase, located within an estimated range of growth in the number of transactions greater than 5%.

Rising value of real estate, with more moderate increases. Although this indicator will be conditioned by several factors, such as inflation, the influence of the end of the moratoria in the second half of the year or the shortage of supplies, the forecasts seem to indicate that house prices will continue to rise. With small fluctuations, showing moderate increases of approximately 3%, and can reach up to 6%, according to the recent forecasts of the Spanish Association of Value Analysis (AEV).

Rebound in mortgage operations. The year 2021 has not only been characterized by the increase in the contracting of new mortgages (+26% year-on-year in October and +20% compared to 2019, according to the College of Registrars), but also by the increase in novations or subrogations. This advance, caused by the growth in demand for housing, the facilities now offered by the law regulating real estate credit contracts or the favorable conditions offered by banks, will retain its positive context in 2022.

Increase in housing supply. Despite the fact that the Bank of Spain warned at the end of 2021 of a housing supply with little dynamism, especially with regard to new construction housing and single-family properties, a type of asset that has begun to arouse great interest in the market, also pointed out that this path would change in 2022, at least in the medium term, thanks to the implementation of the Housing Rehabilitation and Urban Regeneration Plan, which, backed by European Next Generation funds, could boost residential activity, both rehabilitation like new construction.

Recovery of the rental market. Although it remains to be seen how the new Housing Law affects the rental market, which is expected to come into force in 2022, forecasts suggest that this new year will mark a turning point, with a recovery in demand and, very especially, of prices, which will experience a generalized increase of approximately 5%. First, in the big cities and, later, in the rest of the country.

Growth of professional rental management. Currently, more than 90% of the rental housing stock is in private hands. This makes it difficult to respond to new market demands, such as digital access to contracting and rental services, or adaptation to issues related to energy efficiency or new legislation.

Build to rent boom. The improvement in the rental market, the greater interest in newly built properties, and the increase in professionalized management of leased assets will make build-to-rent one of the major trends of the year. In fact, by 2022, the increase in investment in this line of business will exceed 10% according to the latest estimates.

The digital transformation of the sector, more real than ever. The COVID-19 health crisis accelerated the digital transformation processes of many sectors, including real estate, which led many traditional real estate companies to look for new alternatives to attract customers and facilitate processes. It is expected that during 2022 this trend will take hold, which allows, among other things, the signing of mortgages electronically, virtual visits, the professionalized management of potential buyers or tenants, or the use of machine learning to predict demand.

If you are interested in buying or selling your property and need professional advice, contact us and we will manage all your requirements as soon as possible.

Source: Alimarket

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The real estate market gains momentum with more than 9,000 sales

The real estate market has closed 2021 with clear signs of recovery, after a 5% decrease as a result of the pandemic. According to official figures, until November, 8,200 sales operations were carried out, and forecasts suggest that 2022 will close above 9,000. This is 30% more than a year before, according to data from the General Council of Notaries.

The ease of financing that banks are currently providing, together with low interest rates, are factors that explain the current dynamism of the real estate market in the Canary Islands. To this must be added the savings of households, the improvement in consumer confidence and the need that the pandemic has discovered for larger homes with open spaces.

What’s behind the growing demand?

The demand is formed above all by residents, among whom there are people looking for their first home, and others who, after covid, have decided to change their home. The pandemic has generated new demand and supply, since these are people who sell their homes to buy others. To this demand we must add the foreigners who in 2021 returned to the real estate market of the islands.

Small investors who want to acquire flats as a ‘refuge’ of profitability before other forms of investment are also added. Renting a home on the islands can yield a return of 6% compared to 0.3% given by ten-year government bonds, for example.

The projections for the next months of the year

For the coming months, the real estate sector is confident that the market will maintain its current dynamism. However, problems could arise in relation to the lack of supply of new housing. In 2021, the construction sector boomed, offering the market some 3,500 homes. It is expected to continue at the same pace to respond to demand and prevent prices from being excessively stressed.

One of the peculiarities of the purchases that are currently being made is that many are made with their own resources in their entirety, without closing a mortgage, or partially, resorting to credit in a small percentage.

Prices rise 6% and will continue to rise in 2022

Housing prices have risen in 2021 between 4% and 6%. In the second case, the rebound has been greater due to the rise in the price of raw materials. According to Tinsa data, the average price per square meter on the islands is 1,376 euros. The figure assumes that it is still 28% below maximum prices. From the lows, they are up 20%.

By province, Santa Cruz de Tenerife has experienced a greater increase, of 10.9%, while in Las Palmas the rise is 5.2%. By capital, the city of Las Palmas de Gran Canaria presents a higher price, of 1,526 euros, while in Santa Cruz de Tenerife, the square meter stands at 1,394 euros. Prices are expected to continue to rise slightly throughout this year, although the experts consulted reject the possibility of a new bubble.

From the Official Association of Real Estate Agents, it points out that there is no prospect that the market will overheat or become tense in the coming years and they completely rule out the possibility that Spain will once again plunge into a real estate bubble situation.

If you are thinking of buying or selling a property and need professional advice, contact us and we will manage your request.

Source: Canarias7

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Keys to the sustained growth of the real estate sector in 2022

2021 has been a year of recovery, and as travel restrictions were lifted and vaccine programs advanced, international and Spanish buyers have looked to acquire Spanish properties and as a result, 2022 has seen strong results across the board.

Sales have soared and, in some areas, are back to pre-pandemic levels. Prices have also increased again with newly built properties.

Economic scenario in 2022

In a generally positive context for the Spanish property market, there is also widespread optimism for the economy. This year Spain has experienced solid GDP growth and has just received billions of euros in European funds, which constitutes a huge injection in the country’s balance sheets.

In addition, household savings have returned to pre-crisis levels. Bankinter’s latest analysis for the real estate sector in Spain forecasts that household savings will continue to increase in 2022, so greater liquidity among buyers seems likely.

Property prices in Spain

So what does a buoyant economy and housing market mean for home prices next year? The 2021 trend was upward and everything indicates that 2022 will see a similar scenario. Bankinter currently forecasts a 2% price rise overall next year. It is estimated that the rebound will be greater, particularly in the most requested parts of Spain.

There is certainly plenty of room for growth as Spanish property values ​​remain well below their peak reached in 2007. According to Tinsa’s latest market report, they stood at -29% in October this year. Also, with interest rates still at record lows, few investment products offer the same returns as real estate.

Sales of Spanish real estate in 2022

With savings at pre-crisis levels and the Euribor mortgage interest rate still below zero, everything points to strong housing demand next year. Bankinter forecasts some 500,000 operations, figures similar to those seen for the last time in 2007. Of these, 400,000 would be second-hand sales and the remaining 100,000 for new construction.

Land sales will continue to experience strong growth. Purchases in this sector have risen by around 45% so far this year, a rate that has pushed up land prices in Spain by 11%. Bankinter expects more moderate increases in land prices in 2022 but continuity in demand.

New lifestyle trends instigated by the pandemic have fueled demand for new build properties. These offer larger homes and higher quality finishes, both of which are highly sought after features among homebuyers.

Bankinter says the market could easily accommodate 100,000 new additions next year after 90,000 this year. The figures are in stark contrast to 2013, when development of just 34,000 new properties in Spain began.

The advance of digitization

Experts explain that the arrival of the pandemic has changed the way we live and, therefore, the type of home we need; another of the factors that have facilitated the high increase in transactions in the real estate market. Therefore, technology is positioned as a key link to respond to the new needs of both buyers and sellers.

According to the latest Casavo report, 86% of Spaniards living in Madrid and Barcelona who were in the process of selling a property throughout 2021, stated that they turned to real estate operators. Whether the sale is made on their own account or through the intermediation of a real estate operator, what seems evident is the use of digital channels to advertise the home. 81% of the operators opt for internet platforms and pages, a solution that is also chosen by 77% of the sellers who decide to manage the sale on their own.

Why wait until 2022 in real estate?

Everything within the broader economic context points to a strong year for Spanish real estate in 2022. And with prices and demand continuing their upward trend, it makes financial sense to buy now rather than wait until next year.

If you want to take a look at what is on the market on the island of Tenerife, contact our team of experts. They will be happy to advise you on the best location and the property that suits you best.

Source: El Economista

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Know the details about the State Housing Plan 2022-2025

The new Public Housing Plan 2022-2025 sets medium and long-term objectives to increase the number of homes in Spain, especially social contracting and affordable prices. In this new blog post, we’ll take a look at the main issues addressed by this support program and point out who will be able to take advantage of the grants.

The Official State Gazette (BOE) published Royal Decree 42/2022 dated January 18, which regulates the Public Housing Affordability Plan 2022-2025. After making changes to the 2018-2021 Housing Plan, the programs were geared towards the rental market (as opposed to real estate), as well as increasing the stock of public housing.

What is the objective of the State Housing Plan 2022-2025?

The objective of this program is to increase the number of public housing offers and to establish aid in the purchase of up to 60% of housing by state administrations, their subsidiaries or subordinate organizations up to 60% of the cost. This applies to housing for the purpose of directly replenishing the state housing fund.

Organizations in this category will be able to receive up to EUR 700 per m2, but not more than 50% of the costs or EUR 50,000 euros for each property. The rent cannot exceed 10 euros per m2 and will be calculated for at least 20 years for elderly or disabled people with incomes below five minimum wages. In addition, the Housing Plan includes a program to provide some 15,000 SAREB apartments for social and affordable rental.

What are the benefits of the State Housing Plan 2022-2025?

In addition to the preference for the coexistence model and other new ways in which public spaces receive a larger surface than private spaces. They can get up to €420 per m2, but not more than 50% of the cost, and up to €50,000 per dwelling, which will be rented at a price of no more than €8 per m2 to people earning less than five times the minimum wage.

These are the conditions of the State Plan

The subsidy is granted so that any private entity can provide affordable or social rental housing to autonomous communities and municipalities. The facilities will be provided for a period of at least 7 years on the condition that the regions and municipalities rent them at a price not exceeding 400 euros per month to people with incomes not exceeding five minimum wages.

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The Spanish Government validates the new capital gains tax

The Spanish Government recently validated two regulations dependent on the Ministry of Finance and Public Function. In the first place, the Royal Decree Law that reformed the capital gains tax, which had been repealed by the Constitutional Court, was validated. And secondly, progress was made on the reform of the public employment law to reduce the high temporality that exists among administration employees.

Within the framework of the first regulation, the Government approved the new municipal capital gains tax, the predecessor of which was annulled by the Constitutional Court. The rule had 198 votes in favor, 137 against and five abstentions. Although the new tax remained in operation for several weeks, it required the final validation of Congress for its formal formation.

Two forms of payment for taxpayers

As stipulated, the municipalities will have six months to transpose the norm into their regulations. However, the maximum percentages included in the reform of the law are already applicable. In turn, the Government modified the calculation method allowing two alternatives for taxpayers to choose according to their convenience. This was done in order to avoid the veto imposed by the Constitutional Court.

Since 2004, the regulation had had three sentences against the high court, until the final in October, which was without effect. However, the Government was able to obtain the support of its partners, despite the criticism that had been made against the modification. Simultaneously, the creation of a fund was also requested to compensate the municipalities for the loss of taxes.

The creation of a municipal compensatory fund

The Minister of Finance, María Jesús Montero, presented claims from her initial presentation in defense of the Royal Decree, stating that said fund was not going to be applied. “In the first place I want to remember that when the first sentence was known, in 2017 and then another two in 2019 until the most recent in 2021, the application of a fund was not required,” he added.

The right-wing group also voiced criticism of the tax, while demanding compensation for declining revenues. “We are against this Royal Decree for the form but also for the fund, because it taxes the capital gain that is already taxed in personal income tax,” said the popular deputy Carolina Spain.

Also in Pdecat and JxCat they opted for compensation for municipalities. “There is no solution, there is a lack of a compensation fund, one temporary and the other permanent,” said Deputy Josep Pallés y Masó. For his part, the deputy Joan Margall pointed out: “This Royal Decree was necessary, but it still seems like a patch. The structural problems will not be fixed in this way and some municipalities are going to see their income diminished ”.

A greater share of property taxes

The capital gains tax was approved by the Government of José María Aznar, weeks before leaving La Moncloa in 2004. At the same time, it has accused Montero of “raising taxes” with this capital gains reform, and has demanded a fund of compensation for the loss estimated to occur in the collection. “Be brave and create a compensation fund for municipalities,” he said.

Along a similar line, Carmen Martínez requested the abolition of this tax and its replacement by a greater share of the taxes levied on real estate, such as personal income tax. Martínez also pointed out that there is no additional fund for municipalities. However, unlike the PP, those of Inés Arrimadas have abstained from voting.

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Learn about the benefits of conducting a real estate auction

Real estate auctions are an interesting option for both owners and banks looking to sell a property quickly and with high profitability. While property auctions often apply to homes with mortgage debt, an auction can also be a good option for homeowners who have an unusual home they want to sell.

Fair market value

One of the biggest benefits of a real estate auction is the high probability of selling the property for its fair market value. This happens when buyers compete to reach a winning offer, bringing the price of a home to the highest price buyers are willing to pay and the lowest price a seller is willing to accept. This benefits both sellers and buyers, who can use the auction process as an indicator of home value.

Prior approval

Buyers wishing to bid on a property at a real estate auction must register with the real estate agency that oversees the auction. This allows the real estate entity to pre-approve buyers based on their creditworthiness. When it’s time to bid, only pre-approved buyers can participate and know the seller’s reserve price in advance. This ensures that a buyer can make the purchase safely.

Quick sale

Auctions are much faster than most conventional home sales. Sellers can schedule a date and know exactly when the home will sell. This can be useful for scheduling a move or making other plans that require financial commitments. The speed of a home auction also reduces the cost of selling a home by the realtor. Homeowners also save by reducing maintenance costs while the home is on the market.

Alternative

The real estate auction is an alternative for homeowners who have a home that would be difficult to sell or value on the open market. This is especially true for homes that include some type of special feature or unusual features that may attract a certain group of buyers.

How can you organize a real estate auction?

To successfully carry out a real estate auction, a day must be scheduled to hold the event. Before starting the auction, a minimum starting price for the property must be set. All interested parties should bid a minimum amount to be able to access the auction, it could be from 1% to 3% of the minimum established value.

Once the auction is open, potential buyers must proceed to deposit their offer in a sealed envelope. We must remember that there is a base price and logically the offer, to be really tentative, must be above said value. Once all the offers are received, all the envelopes are opened in the presence of potential buyers, making sure that the process is as transparent as possible. The person or entity that made the highest bid is the one to whom the property is awarded.

Once the auction is closed, a deposit contract is prepared where the buyer is granted a certain time to pay 10% of the amount. If this customer defaults on the payment, the purchase is automatically awarded to the second bidder.

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How to prescribe and legalize a modified property

Did you know that to carry out an extension or modification of your property you must request a prior permit from the town hall? If you did not know, in the following article we offer you a summary of the considerations that you must take into account and the steps that you must follow before carrying out an extension or modification project of the property.

You must bear in mind that before carrying out an extension or modification work it is necessary to carry out and present a project of modification of a property before the corresponding city hall in order to request a permit for the execution of said work according to the rules established for the construction of buildings. This step applies to both larger and smaller scale works.

Prior permission must be requested from the town hall

Many times due to lack of knowledge, or for not waiting for the time it takes for the city council to issue the permit, people decide to carry out the extension or modification without the corresponding permit issued by the relevant authority. Making this decision can create a problem in the future when the person decides to sell their property. This means that the property cannot be sold taking into account the reforms carried out if these were not endorsed by the city council through the corresponding legal permits.

For example, if someone decides to buy a property that was modified without the permissions established through a mortgage, they will have great difficulty in doing so since the bank will require the accreditation of said extension in a simple note as a requirement. Let us remember that through this simple note an appraisal is made, that is, the value of the property is established based on the useful meters that the property has. In this simple note, extensions and modifications are not taken into consideration if you do not have the prior permission issued by the city council.

Prescription vs. legalization

So, in order to legalize a work, you must first go through the prescription. In order to make the prescription, it is very important to know what the requirements are requested by the city council. For example, if a work was executed between 4 or 10 years, documentation must be presented that shows that said work was executed during that period of time.

A tool to demonstrate the development of a work is the Grafcan, which allows taking photos of the property showing the progress that a certain modification project has had during a limited time. With the information obtained through this tool, a document is usually prepared by a professional, and in which it is certified that the work was carried out in the specified time.

Professional advice should be sought

Once the prescription of the property is obtained, the next step will be the legalization. This step is very important since in order to deed the property it is necessary that it be legalized. Keep in mind that a work that has been prescribed cannot necessarily be legalized. If a work does not respect the law, even if it may be prescribed, it does not automatically obtain legalization.

So, before carrying out a work, it is advisable to seek professional advice that can provide specific and adequate information. Many times projects that are desirable for a property may not always be legally feasible. It is important that we take into account what can be done in a property based on the regulations and laws in force stipulated for construction.

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How to differentiate the purchase-sale contract of deposit and reserve

The earnest money purchase and sale contract and the reserve contract may seem similar to each other, but in reality they are very different. Many people often confuse one with the other when establishing to acquire a property. That is why we want to show you in this new blog article the difference between these two types of documents.

The reservation contract is usually used to acquire a property through a developer; that is, a property that is still under construction or that has just been completed. As its name says, in the reservation contract a reservation is usually made as a sign. This amount is almost always between 1% and 5% of the total cost of the property. Then, in the document, the different payments are established until the total established cost is reached, which closes with the signature of the notary.

It is important to know that this type of contract is not usually terminated. This means that the buyer has the right to receive the property for the pre-established price and within the period pre-established in the document. Thus the seller is obliged to sell you the property as agreed. In exceptional cases, the contract can only be terminated when the two parties fail to comply with the provisions of the document.

Now let’s see the difference with the deposit contract. The first thing to say is that this document is regulated by the Spanish civil code, where three types of contract are indicated: the penitential (which is usually used more), the criminal, and the confirmatory. In the penitential deposit contract, if the buyer does not comply with what is established, he usually loses the money invested. On the other hand, if the seller is the one who defaults, he has the duty to reimburse the buyer twice the amount invested. It is clear that for this type of agreement, compensation can always be paid to the buyer if the seller decides to terminate the contract.

We hope that this clarification serves to differentiate these two types of documents, which may be very similar but are actually very different from each other.

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Rent to own vs. Purchase with deferred payment

In an interview with the real estate agent Patricio Battiato, the director of Remax Golden Mile, Marcelo Dodi, offers us a review on two types of purchase-sale contract, rent with option to buy vs. Rent with deferred payment, in order to establish what their differences and advantages are.

As is well known, these are two different forms of purchase-sale contracts. The first case consists of a rental contract and the second of a contract with an option to buy. Both ways can be established privately or through a notary. Regarding their differences, it should be noted that the deferred payment contract is a purchase-sale contract whose price is paid in installments by the buyer.

When can you start living in a property once one of these two types of contracts has been established?

In the first case, since it is a rental with option to buy, the person can take possession of the property immediately when the rental contract begins. That is, it is a tenant subject to all the regulations established by the civil code. Then, in the case of the purchase-sale with deferred payment, there is freedom of agreement by both parties, that is, the property can be delivered once the payment has been made or on a certain date.

What are the disadvantages that exist in both types of contracts?

Attention must be paid mainly to the guarantees established by both contracts. In the rental contract with the option to purchase a bank guarantee, deposits, payment insurance can be requested, or a notarial arbitration can be established to establish the agreements between the tenant and the owner. In the other case, a domain reservation pact can be established where possession is handed over without the transfer of ownership. An express resolution condition or mortgage between individuals is not taxed. You can also make a criminal clause where the compliance to which the person who assumes the rent for deferred payment is established.

Are there regulations for both cases?

The purchase with a deferred payment agreement is perfectly typified within the Spanish civil code. On the other hand, the rent with option to buy is not clearly established within the law, because it is, on the one hand, a rental, and on the other, an option to buy. However, it always proceeds under the urban rental regulation that establishes five mandatory rental years.

What happens when you finally decide not to buy a property?

If it is decided not to buy the property, the money invested up to that point is clearly lost. But you can also acquire the property complying with the minimum terms established by law, which are approximately a little more than five years.

In this brief interview, some clarifications are established regarding what would be a contract for the sale of rent with option to purchase and rent with deferred payment are some of the main aspects that should be taken into account when establishing an agreement between parts. Of course there are more details, but in principle with these ideas you can establish differences and choose the format that is most convenient for both parties.