The housing market is going through a year of uncertainty, but some market players are already daring to make some predictions for this year. Thus, CBRE affirms that the total number of transactions will be reduced by 29% compared to 2022 when 664,000 transactions were closed. “By type of housing, The new work will be reduced by 4% and the second hand by 32% as a consequence of the increase in financing costs, which in turn will cause the effort rate to rise to close to 38%, levels not reached since 2009,” the consultancy firm told idealista/news.
In any case, CBRE plays down the seriousness of the matter and poses it as a seasonal problem and not a temporary one. “As for the residential market for sale, it will enter a phase of deceleration in 2023, but it will be very limited in time, especially in what refers to the new housing market, which will continue to show signs of good dynamism,” they assert.
But this does not mean that housing as such is going to suffer a bad year because the ‘living’ sector, in which the ‘build to rent’ falls, is going to enjoy a great 2023. In this sense, CBRE defends that the ‘living room’ will continue to be the focus of investment in 2023, backed by a forecast of increasing demand in the face of a limited existing offer, showing less traditional products increasingly as major players by offering vital experiences and high flexibility. These less traditional products are made up of student residences, flex living (coliving and serviced apartments) and senior living. While in 2019 the volume of these sectors represented barely 22% of the total ‘living’, in 2022 they combined more than 51% of the total.
The resilience of offices
In the office segment, the good data from the last financial year predict a good 2023 in which polarization will gain even more prominence and there will be an increasingly complex market for less up-to-date assets, while the highest-quality ones will continue to increase their rents. The economic slowdown that we expect in 2023 will translate into a slight reduction in recruitment figures, both in Madrid (around -5%) and Barcelona (around -10%). This adjustment will not put a brake on the post-pandemic recovery, and in the medium/long term we expect to see how hiring recovers and reaches already balanced figures. Offices are still undergoing a transformation process, with companies still trying to figure out which new ways of working are the ones that best meet the expectations of the worker and guarantee, at the same time, the best response to the needs of the company itself.
Regarding hotels, The favorable prospects for tourism next year will ensure that hotel demand maintains high levels that will maintain investor interest, with special activity in the luxury segment. So much so, that close to 30% of the new openings will be high-end (5 stars and 5 stars GL) and that 50% of the total will be concentrated in Madrid, Malaga, Valencia and the Islands. A trend that we are observing at the European level, where the Ultra Luxury and Economy segments are the categories that have grown the most in operating margin in Europe between 2019 and 2022 (5bps each).
In the uncertain times we live in, the ability to identify blue oceans will be key. In 2023, some emerging sectors such as Education, Healthcare, Agribusiness, Data Centers, Sports, Infrastructure or Life Science, among others, will play a key role. In the specific case of Life Science, the tendency to create clusters that group Life Science companies where they can develop research and with proximity between competitors to increase productivity will continue.
‘Prime yields’ close to their maximum
The tightening of monetary policy as a measure against inflation marked a stressed 2022 with significant increases in the 10-year Spanish sovereign bond. This translated into direct increases in ‘prime yields’ in all segments, to a greater or lesser extent.
Looking ahead to 2023, this upward trend is expected to continue, albeit at a slower rate, since the largest corrections have been applied in 2022. It is estimated that in most types of assets, more than 70% of the maximum expected adjustment has already been coveredor even more in some sectors already close to their maximum prime yield.