A decline in sales occurs as the buyer needs bank financing. It has been weighing on the market, but the impending mortgage war and the end of the ECB's hard line may encourage it to return.
If the data on home sales at the end of 2023 proves anything, it is unlikely that the pace of 2021 and 2022 will be sustained, setting the bar very high. Last year, 640,451 buying and selling transactions were formalized, Khan saidGeneral Council of Notaries, 11.2% less than 2022, the highest in a decade and a half. Despite the decline, it was a good year in terms of numbers, as it was the third best year since 2008. Although it is not so good in terms of feelingsBecause the chain always breaks at the weakest link: the decline is mainly due to the weight loss in the market of people who have to put more effort into buying a house, such as those who need bank financing, those with low incomes or young people who are ready to be independent.
This may not be a problem for young people who can continue to live with their parents, but it can be a problem for those who live in rented accommodation, where rent is very expensive. Reduces savings for potential future purchases.
The rise in rates is largely responsible for the decline in sales, because it has increased the interest charged by banks to their customers. To this must be added the fact that housing prices continue to rise, even during the contraction of the real estate market: in 2023 it was 1.5%. Gonzalo Bernardos, professor of economics at the University of Barcelona and director of the Master's Degree in Real Estate, explained that the phenomenon was purely statistical, but what actually happened was that there was a greater presence of foreign buyers, investors and other market actors. Purchasing power has “bought more expensive homes than the previous year,” which has a distorting effect.
“The most vulnerable are the mortgage holders. We are in a real estate recession“, confirms Bernardos. The data confirms it: a 21.3% drop in mortgages, compared to an 11.2% drop in operations. That is, the number of purchases and sales without a mortgage is increasing.
In contrast to the fantastic data for 2022 and by region, The Balearic Islands (19.9%), Canary Islands (16.8%) and Madrid (16.2%) had the biggest bleeding last year.. These declines are a torpedo in the waterline of market results, as they are among the regions with the largest real estate activity. In fact, only one community recorded more sales and purchases than in 2022: Asturias, with a market weight of only 2.2%.
For its part, The Valencian community, one of only two regions to exceed 100,000 operations, has prevented the decline from being steeper.: Activity fell 7.9% below the national average, while Andalusia (-12.4%) and Catalonia (-12.8%) ended the year with declines in line with the national average.
Fortunately, there are signs of a return to the mortgage buyer's market throughout the year. Bernardos points out the coincidence of the two situations. The first is the macroeconomic and increasingly widespread assumption The European Central Bank will cut interest rates in the coming months, which will make mortgages cheaper. Second, a commercial nature, which comes from the need for banks: “There will be a mortgage war,” Bernardos predicts, “because the banks will not be able to surpass the results this year.”
This will, of course, be a stimulus to demand, but the market will continue to be plagued by its biggest problem, which has no easy or quick fix and will only get worse if a certain real estate boom resumes. It's about supply shortages. Additionally, a good portion of the properties on the market “have incredible prices and are of very poor quality,” says Bernardos.
