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Housing eliminates the specter of a bubble and will better withstand a recession


In extreme economic conditions, With a deep crisis – not just a technological recession– In which GDP shrinks by 1.3% by 2024 and the annual inflation rate rises to 20.6% over the same period, the real estate market will not collapse. If energy prices rise more than expected and the European Central Bank (ECB) is forced to step on the accelerator with more aggressive and faster rate hikes, this would be a critical situation, significantly tightening monetary conditions. So much so The 12-month Euribor climbed to 4.7% -from 2.811% to the one currently listed- and yielding 5.2% for the ten-year bond -today it pays about 3.1% interest-.

This stressed or critical scenario is what the Bank of Spain (BdE) proposed in its Autumn Financial Stability Report on how a deterioration of the situation would affect the entire Spanish financial system. The regulator estimates that in such a scenario, the overall solvency of the sector will remain at an “adequate level” and predicts that Home prices will fall by 2.7% between now and 2024In relation to the general loss of confidence and in which other riskier assets such as equities will fall by 36.1% over the same period.

“Since the initial imbalance is small, house prices fall relatively low And it is assumed that they will survive in an inflationary environment,” the document states. Real estate bubbles lost an average of 28% in value between their peak recorded in 2007. and 2012, when the effects of the severe debt crisis added to the embers of the financial crisis – which led to other Among other things, Spain was forced to ask the European Commission to bail out the banks.

Signs of a cold…but not the flu

According to the latest data available to the entity led by Pablo Hernández de Cos, activity and prices of ‘brick’ still maintain a high rate of growth, although there are some signs of slowdown that hope to be able to confirm. From the information component’s point of view, it is expected that increased uncertainty, decline in real household income and tighter financing conditions will “slow down the expansionary evolution of this market in the coming quarters”.

BdE is closely monitoring real estate market conditions. Thus, they have seen how there are indicators of disequilibrium in these market prices Continue to show signs of overvaluation Which he is already warning of from mid-2021. These signs, “are still for this moment.” In the second quarter, prices rose by 8% compared to the same period last year – when they rose by 8.5% between January and March. Operations also showed a slowdown as purchases and sales between April and June grew by around 20% year-on-year before rising to 8 and 15% in July and August respectively.

The price of materials decreases but labor does not

Other analysts, such as BBVA Research, estimate a A slight decline in home sales for the next financial year, although the level of closures will remain high. If intermediate conditions persist, prices will rise by around 2%. As explained by experts in the latest ‘Real Estate Observatory’ published by the institute, the Spanish economy faces lower growth, higher inflation and a more restrictive monetary policy in the coming months. This confluence of factors, which require households to put in more effort to purchase a home, Reference to less financial burden for households than the financial and housing crisis of 2008.

He predicts that the lack of land in the institute, regulatory uncertainty and the rise in raw material prices will soften the imbalance between supply and demand in the coming months. However, they highlight how in recent months, the price of some construction materials has started to decline compared to the highs reached in the first quarter of the year. In addition, the progressive reduction of bottlenecks and transport costs may also contribute Combine these reductions in material costs. Of course, the problem of the shortage of specialized workers in this field has not been solved, as the agreed salary data will be indicated in the contracts.

Source: lainformacion.com

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