If the experts consulted by Business Insider España is that the coronavirus will continue to have a direct impact on the real estate market in 2022. And this mainly translates into, When buying a house, they will continue to look for homes with open spaces, terraces or gardens.
José María Alfaro, general coordinator of the National Federation of Real Estate Associations (FAI), qualifies it as a “pandemic effect” and maintains that it will still be felt in the coming year.
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The fact that a property had a balcony or terrace, he indicates, “before it was not an added value, but now it has acquired a lot of significance. Even single-family homes will benefit ”.
One more detail about this change in preferences is provided by Javier Fernández-Pacheco, Professor of Finance at EAE Business School: “Teleworking has made us realize that it is essential to be comfortable at home. That is why there is greater interest in leaving the cities, now much importance is given to being outside and having a large house with space to work ”. In his opinion, this is what has happened in 2021 and it is a trend that is going to consolidate.
Slight price increase
The evolution of the pandemic and the work modality that companies implement will also have a direct effect on the price. It is pointed out by José Manuel Fernández, deputy director general of UCI (Union of Real Estate Credits) in It is article published in Idealista.
For him, that companies opt for going back to the office, for a hybrid or to continue teleworking will be something that will greatly affect housing prices.
And he exemplifies it like this: “If in 2020 and at the beginning of 2021 there was an increase in prices in border areas of large cities in Spain, such as the Sierra de Madrid, it was due to the high demand, but now it could fall if the presence of work returns to be the norm, and this would also lead to a possible price increases in the main urban centers of the country”.
In this regard, Alfaro points out that, in real estate matters, there is a Spain at 2 speeds: “The most thriving cities, where there is population and employment growth, and the rest: cities with a population decrease, a higher unemployment rate and an aging population. They have a different rhythm, in bullish times they grow little, however, in bearish times they don’t go down too much ”.
The FAI coordinator explains that, Before the pandemic, the real estate market was in a stabilization phase, after an upward curve that dragged on since 2015 and lasted until 2019, when average prices were very close to the highs of 2007.
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However, the coronavirus changed everything, and now, defines Alfaro, “We are in a phase of real estate de-escalation: there are cities with 50% of properties for sale of which there were 10 years ago”.
This, in his words, has happened because, after the very strong depression with which the market arrived in 2015, demand was incorporated into the market, but the supply was at a different rate. “There was not enough replacement: 2 properties were sold and only one was incorporated back into the market.”
He maintains that in 2022 there will be “a slowing market in which prices will continue to tend to rise and interest rates will remain very low.”
In Idealista they also suspect that possible (and slight) rise in house prices: Real estate experts agree in predicting that, if the situation of the good purchase-sale brand continues, “there could be a slight increase in the price.”
For the UCI deputy director, after analyzing the results of the IX Real Estate Barometer Wave, “real estate agents, who are the ones who really have the pulse of the market, believe that by the end of 2021 and the beginning of 2022 there could be a slight increase (never more than 10%) ”.
Could there be a housing bubble?
According to data from the National Institute of Statistics (INE), since the beginning of summer In Spain, more apartments are already sold than in the middle of the real estate boom: 53,410 sales transactions were closed in September, compared to 45,453 in September 2008.
The difference is that now there is not as much supply as there was then, and a strong mismatch between supply and demand could lead to an upward spiral in prices. Gonzalo Bernardos, head professor of the Real Estate Master at the University of Barcelona, points out that, “if developers were building 300,000 homes a year, I would say that we are far from the real estate bubble, but pulling up, next year they will do the same. I add 130,000, and that does not give to absorb the demand “.
In fact, the Bank of Spain itself has put bubble risk on its radar. On the one hand, it says that “there is no clear evidence of overheating”, but at the same time it recognizes that the price of housing is already above what it cost in 2019, before the pandemic, and exceeds (although by little) its equilibrium levels.
In any case, if there is one, it will not be like the last bubble. The difference with the previous crisis is that now the financial risk is low, and without a credit bubble the scope of a hypothetical boom is more limited.
Low interest rates
The interest rate is the other key leg: 60% of the mortgages that are being signed are at a fixed rate, underlines the representative of the FAI, “and it is being financed at 1.20 or 1.30 and 15, 20 or 25 years. This protects a lot. Faced with any fluctuation, there will not be a rise in quotas like those that took place before 2008, when some families had to bear increases of up to 60% “.
The EAE professor has more doubts. He focuses his analysis on inflation: “If it consolidates, there may not be an increase in interest rates and, therefore, we will stay the same. But if it consolidates and the European Central Bank raises rates, this will be reflected in the Euribor and there will be downward pressure on the price of flats”.
Will 2022 be a good year to buy a flat?
In a situation like the current one, marked by pandemic uncertainty, it is not, much less easy, to guess the future. INFORMA’s DBK Sector Observatory estimates that, in the short and medium term, the real estate market presents favorable prospects, in a context marked by the improvement of the economy, low interest rates and the increase in the level of savings, “Which allows anticipating a recovery in demand and prices.”
In UCI, as they point out in Idealista, they observe that the great change will be produced by the “very good situation that clients now have to apply for a mortgage, because the entities are betting on very cheap proposals.”
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Fernández-Pacheco recalls that, if the objective is buy to investThe important thing is to do the math: “The profit that I am going to get will include the price at which I sell it, less the one I bought it at, plus the rents that I have been collecting. But if interest rates go up in the middle, the rent will be good for me and the sale price not so good ”.
To all this, it is important to add what may happen to the economy as a whole. “The uncertainty is enormous, few times I have seen so many ‘what if, and if’,” he concludes.
José Manuel Fernández predicts that the investment will focus, above all, on rehabilitation: “With the arrival of European funds, at the public level, significant liquidity will be allocated to the renovation of homes in favor of energy efficiency, which will also drive purchase and reform. So I think we will see much more investment from homeowners than years ago to improve the quality and energy efficiency of their homes. “