The prices of used housing in Spain registered a rise of 2.9% during the first quarter of the year, according to the idealista report. The m² is now 1,943 euros and, according to the annual variation, prices have increased by 7.3% in the last twelve months. The experts analyze how this sector will evolve in the coming months of 2023, assuring that there will be a balance between housing prices and access to credit and that demand will be regulated.
Increase or decrease in home prices during the second quarter
The real estate market must be understood as a balance between the price of housing and the price of credits. This factor is essential to understand the fluctuations in house prices in the second quarter of 2023. Against this background, the recent rise in interest rates promoted by the European Central Bank (ECB), with the aim of reducing inflation to 2% in the medium term, it will be observed how the price of housing falls significantly in the next quarter.
However, it must be borne in mind that the significant decline in housing prices will be accompanied by an increase in the cost of mortgage loans which, to date, banks have offered at ridiculously low and unusual interest rates. At the time of transferring this to potential buyers and investors, with which the real estate market goes towards regulation.
Some slight price reduction can be seen in high-priced homes. “Small investment homes are not going to go down at all, but may even go up a bit more because, with the rise in mortgage costs, many people have had to continue renting and have not been able to buy.”
It is possible that the demand will regulate somewhat downwards this 2023 and that the price of housing may adjust somewhat, but not significantly, “since despite the rise in interest rates, demand continues to remain strong due to above all to the stability of employment”.
The annual variation rate of the CPI in Spain in March 2023 was 3.3%, 2.7 points lower than that of the previous month, according to the INE. How can this influence house prices?
Although there is a drop, it is not excessively significant data either, since it is an interannual variation that is contextually compared with the month in which the invasion of Ukraine took place and energy costs skyrocketed.
If we focus on core inflation, excluding food and energy, it has barely been reduced by one tenth to 7.5%.
We believe that the gradual reduction in inflation will lead to a reduction in prices in the medium term. If we talk about the long term, it is still early to predict a significant reduction in prices in the real estate sector, since underlying inflation, which is the indicator that allows us to know the health of the Spanish economy, is still too high.
Types of homes and places where they can lower the price more
In the hypothetical case of a downward adjustment in housing prices, the homes that would suffer the most are those in areas with little demand, such as second homes.
We must not lose sight of the fact that housing is a safe investment in times of uncertainty, which is why the appetite of the real estate sector is booming in the current economic situation. Prices will suffer a significant reduction in inland provinces, such as Castilla La Mancha or Castilla y León.
“The rise of teleworking and the climate that we enjoy in the coastal areas of Spain will mean that areas such as Levante or the Costa del Sol will not be affected to a large extent by this reduction in prices. In the same way, the nerve centers of large cities such as Madrid and Barcelona will still take time to experience this general decrease in the cost of housing”.
Prices may decrease slightly in the case of the high price and size housing, but they will not decrease in the small investment product.
Is the second quarter the time to buy a home?
No significant adjustments are foreseen in the price of housing and if there were, these would be due to more expensive financing, “so for all those buyers who need a mortgage, I believe that this second quarter continues to be a good time to buy a home, since financing can still be obtained in good conditions”.
For those buyers who are determined to buy, I would not advise them to wait until the next quarter because I don’t think they are going to find big reductions in prices.
House prices are expected to begin to decline in the second quarter of 2023, making it a more propitious and beneficial time to purchase a property. “We must take into account that the fluctuation and change of prices and the paradigm of the sector will give rise to a new trend: potential buyers will have greater bargaining power than sellers.