The Price Of Housing Will Rise In Spain By 4% In 2022 Due To The Cost Of Materials

The house prices in Spain will rise around 4% in 2022 by the rising cost of raw materials and blocking international trade, according to the real estate report of the CaixaBank, which foresees that 2021 will close with 545,000 purchases, a figure not recorded since 2008.

The entity estimates that the boom experienced in the sector this year will moderate in 2022, which will place transactions at levels similar to those before the pandemic, around 500.000. Although the delivery of new homes has not only exceeded precovid levels this year, but is also in highs since 2012, the report recalls that these figures do not reflect the current situation of the supply of new construction, since they refer to promotions started years ago.

Much more dependent on structural factors, the new offer continues to be “lagged”, with visas between January and September 3.9% below 2019. According to CaixaBank, if the current rate is maintained, slightly more than 100,000 visas will have been issued of new construction in the whole of 2021, a figure very similar to those of 2018 and 2019.

Among the favorable prospects for the sector, the report highlights the strength of the factors driving demand and the boosting effect of the arrival of European reconstruction funds, which in the area of ​​housing will go to rehabilitation. He also points out that favorable financing conditions will continue to support real estate investment.

However, it emphasizes that the “clouds” related to the rise in raw materials prices and the blocking of international trade “could hinder the recovery of supply.” According to data from Eurostat, the costs of the sector are growing above 12% per year and the prices of certain supplies, above 15%.

Along these lines, a recent survey by the National Construction Confederation (CNC) collects that 75% of companies have suffered some shortage or unusual delay of wood, aluminum or steel, among other materials. That is why the employer’s association has been warning of construction delays and calls for a greater possibility of renegotiating contracts, extending the deadlines for the execution of works without penalties and speeding up licenses.

Forecast of price rises, but not a bubble

Since the fall in prices hit the bottom between the last quarter of 2020 and the first of 2021, rates have been rebounding to exceed the pre-pandemic level in September; an upward trend that is observed in all autonomous communities, although the degree of recovery is heterogeneous.

By 2022, CaixaBank’s research service foresees an average increase in house prices of around 4% (appraisal value). However, in the medium term, he does not expect prices to enter a worrisome upward spiral, but to experience growth in line with the evolution of household income, once the “champagne effect” of demand and supply fades recovers more significantly and commodity prices moderate.

Regarding the financial situation of families, the report confirms that the economic policies implemented during the pandemic have cushioned the impact of the crisis on households and has managed to reduce the mortgage effort in most of them, although it warns that they are still continuing. there are pockets of vulnerability among low-income households.

Meanwhile, the pandemic has accentuated the downward trend in rental income, according to the analysis made by the bank based on the amounts of the receipts it manages. This indicates that in four out of six municipalities and provinces rents had already peaked when the covid broke out, after five years of increases much higher than family income, and that much of the adjustment has occurred between rents of amounts lower and in the most touristic municipalities.

Between January and September 2021, the rental price has fallen in 65% of the provinces and 55% of the municipalities analyzed by the bank, compared to the same period of the previous year. After admitting that it is not possible for it to evaluate the effect of the Catalan income containment law, the report warns, appealing to international experience, of the importance of “carefully evaluating the effectiveness and impact of this type of measures” with a view to the approval of the state housing law, “since, in certain cases, it can be counterproductive.”

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