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