The housing market is facing a year of contrasts. Although the slowdown in the economy and the rise in interest rates will weigh on home sales and prices, in the case of rentals, the scenario points to greater demand and higher rents.
This is the forecast that the economics professor at the University of Barcelona and real estate analyst and consultant Gonzalo Bernardos. During the presentation of the report ‘real estate market 2023’ of the luxury real estate Engel & Völkers in Madrid, the economist has stated that “Rent is a top-notch national problem.”
At the moment rents are at all-time highsafter closing February at 11.7 euros/m2, according to idealista data, and the worsening of the buying and selling market will continue to push prices up.
“We’re in a real estate recession, but it’s not a crisis. We are not in a situation similar to that of 2008 nor are home sales going to hit lows like in 2013, but sales will fall this year by 15% and prices by 5%, after experiencing a spectacular 2022 with more than 700,000 transactions “, explained the economics professor.
Behind this setback is the impact of the global economic slowdown and the difficulties of many families in obtaining a mortgage to buy a home, given the worsening financing conditions due to the rise in interest rates. Since last July, The European Central Bank (ECB) has applied six increases in the price of moneyreaching 3.5%, its highest level since October 2008.
According to Gonzalo Bernardos, “this year there will be discrepancies between supply and demand, and this will reduce transactions. The most affected will be the demand for investment, especially those investors specialized in buying, reforming and selling, and also inland Spain, because it has less demand. The best areas hold up better than the modest ones in times of crisis.”
And those households that cannot access financing to purchase a home will add to the already high demand for rental housing, which in recent years has become the only housing solution for young people and the itinerant population, including students. , executives and workers with labor mobility.
The problem with the rental market, as Bernardos points out, is that “successive governments in Spain have not been aware of the problem. They have not put land on the market and have not promoted subsidized housing, so the offer has fallen into the hands of the private sector. And we have a party like Podemos that goes against the private owner.”
In addition, the economist criticizes the interventionism that the Government is promoting in recent years, such as the cap on rents included in the Housing Law that is still in parliament, and insists that this type of measure, instead of favoring the most humble, it will have the opposite effect.
Among the consequences, Bernardos points out, for example, that many apartments will go from conventional rental to seasonal rental, which will further reduce the offer, and insists that“people will not be able to rent” a home, so you think that “The star market this year will be room rentals.”
Smart price control
Instead of applying a price control based on capping the maximum rents that homeowners located in stressed areas can establish as planned, the economist and real estate consultant defends what he calls “intelligent price control”, based broadly in giving incentives to the owners.
Among the measures it proposes is that the Public Administration pay a kind of insurance to landlords, that it establishes tax discounts such as personal income tax or IBI or that it grants monetary benefits. “Instead of bothering and criminalizing the owners, we must encourage them to help the most humble families and build many rental homes around the big cities,” said Bernardos.
New construction and the luxury market, immune to the real estate recession
With regard to newly built housing, the economist believes that “there will be no problem for all the stock to be absorbed, because almost all the promoters barely have stock. Last year they already sold close to 60% of the 2023 promotions and close to 40% of 2024. It is as if the new construction were an island: there will be no decrease in sales or prices, because the profile of the plaintiff is middle/upper class that can afford to buy and does not have to go into debt at 80%”.
From the luxury real estate agency Engel & Völkers, they also do not expect price corrections for new homes, but rather the opposite, and they emphasize that ‘prime’ housing will also perform better than the market in general. In this sense, Constanza Maya, Head of Expansion & Support Engel & Völkers Iberia, stresses that “the luxury market moves with rules independent of the standard and is more stable to economic and political changes”, and recalls that “most premium operations exceed 2 million euros and are rarely closed with bank financing ”.