2023-06-23 06:15:56
MADRID. The Bank of Spain published a report last week warning of a bottleneck between supply and demand in the housing marketwhich makes the price of real estate resist falling despite the drop in activity.
Two main ideas could be extracted from it:
After the initial impact of the pandemic, Demand for home ownership has recovered –at a national level – with greater intensity than supply, which is more rigid in the short term, which has translated into a certain imbalance between the two and upward pressure on prices. Currently, and despite the increase in the cost of credit, due to the tightening of the monetary policy, in the current inflationary environment in which we find ourselves, It is foreseeable that the price of housing -in nominal terms- will continue to show greater downward resistance than the quantity variables of the residential market -such as sales or visas-, due to the scarcity of new construction, the high costs of construction materials and the favorable financial situation of the different agents in this market.
What’s more, the previous month we already commented that we expected this year, 2023, to consolidate the change, vs 2022, towards lower levels of mortgage concessions. And it is that, the financial system has the capacity to continue granting credit. However, the current situation with the slowdown in the economy and the rise in rates – the average interest rate on new mortgages on homes rises more than one point compared to the previous year, up to 3.09% – pointed to a lower demand from households.
Latest INE data
All of the above is reflected perfectly if we look at the data published yesterday Thursday by the INE, where it can be seen how the number of mortgages granted for homes in Spain fell by 18.3% year-on-year in April (after -15.7% year-on-year already in March), up to 27,053, so that the total amount granted fell by 21.6% year-on-year.
However, if we focus our attention now on the average amount, with data at the end of April 2023, this mantra of ‘resistance to falling’ can be seen, and it is that it has been reduced, although in a much lesser way than in total amounts, falling 4.1%, to 136,945 euros. This way, for the first time since November 2021 – at which time it reached 138,189 euros – it is less than 140,000 euros.
Finally, and as a comment, emphasize that the average duration of home mortgages is still around 24 years, staying in this range for some time now. There is still more than half a year to go, although everything seems to indicate that this downward trend will continue.
Marta Pérez Amigot, Ibercaja Economic and Financial Analysis Unit
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