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Will there be a boom in the real estate sector during 2022?

Real estate sales have picked up again in many countries after the pandemic. Spain is one of the places where the cost of the “brick” has increased, with housing construction figures not seen since 2008. Is there a risk of returning to a bubble? How does the future present itself in Spain regarding this issue?

Last 2021 was a good year for the real estate market, with a sale of 674,014 homes, according to data from the Ministry of Transport, Mobility and Urban Agenda (Mitma). Of all of them, 115,038 operations were purchases of new homes, according to the INE.

The 2020 confinement due to the pandemic caused a sharp drop in this figure (415,748 contracts). However, after the economic and social recovery, the figure will probably continue to grow, opening the possibility of a new real estate boom in 2022.

How the housing market has evolved

Regarding the price, there are also three sources that point towards an uptrend. According to data from the Appraisal Society, the price of new housing rose by 3% in 2021 (2-551 euros/m2). Taking the entire market as a reference, Tinsa places the average price of housing in Spain at 1,609 euros/m2.

For its part, Idealista, another expert in the sector, places this price at 1,825 per square meter, during the first quarter of 2022. In this case, it sets a drop of 0.2% compared to the previous quarter.

The savings accumulated during the pandemic, the recovery of the tourist market from the second-hand market and the 0% interest rates maintained by the European Central Bank (ECB) are factors that can drive up the price of money.

On the contrary, high inflation, which stood at 9.8% in March, the economic consequences of the Russian invasion of Ukraine, a near rise in interest rates and the rise in the Euribor could stop the trend . This indicator has remained in negative territory for the past few years, but is about to return to positive figures.

What happens if there is a new housing bubble?

The real estate bubble had a devastating effect on the Spanish economy, causing a crisis from which scars still remain. Hundreds of thousands of mortgages were left unpaid, many construction companies went bankrupt and as a consequence, many homes were left empty.

In the event of a new bubble, these circumstances could occur:

  • A collapse in housing prices, which fell by almost 30% from 2007 to 2016 according to Idealista, falling from almost 2,100 euros/m2 to below 1,500.
  • A collapse of built homes: 2013 marked the historical minimum of new-build homes with 34,288. On the contrary, 2006 was the maximum with 865,561.
  • An increase in delinquencies and evictions, which could increase with a possible rise in interest rates.

It is a hard and accurate blow to one of the most productive sectors of the Spanish economy, although it is far from happening as it did in 2004-05. At that time, Spain built more new homes than France, Germany, the United Kingdom and Italy combined.

If you are looking for advice from a professional in the real estate sector, you can contact us and consult with our team of professionals.

Source: Housell