Despite the ups and downs in the housing markets during 2020, in which sales and mortgages have suffered from uncertainty and restrictions linked to the coronavirus, its recovery could be close, as well as changes in the evolution of the prices of purchase and rental that the market has been waiting for months.
A) Yes, 2021 could confirm the recovery of the real estate sector after closing the previous year with the largest drop in home sales since 2009 and down to the lowest figures in the last 4 years, with many vacation rental properties swelling the residential market and pushing prices down and with the signing of mortgages registering their first setback in 7 years despite the fact that the Euribor reached all-time lows.
With regard to the sale of homes, the recovery could take place from the second semester and reach half a million sales by the end of the year, as predicted by José María Alfaro, general coordinator of the Federation of Mortgage Associations (FAI) during a joint press conference with the Prohipotecas platform in which they have offered their forecasts for 2021 in the real estate and mortgage market.
Sales prices could drop up to 9%, but not in the whole country
Alfaro explained that 2019 was the first year in which a change in trend was detected in the real estate sector after several years of sustained growth, but that its stabilization “was truncated by the pandemic”, to later reactivate its activity after the end of the first state of alarm, a trend that has stood out that has been maintained from that moment and that at the beginning of the year, the market has recovered “robustness, although with little inventory and 2 speeds”.
This Bankia graph shows why banks are having more problems in their mortgage business than they expected
Thus, the general coordinator of the FAI has considered that “the market is healthy, users consider the sector reliable and with conditions of access to financing that suggest that the best is yet to come when the pandemic subsides”, noting that his forecasts they are optimistic, although they have ruled out a general decline in prices in 2021, “if not a stabilization, with transactions recovering in the second half.”
Regarding the sale prices, the expert has stated that downward adjustments are expected in some areas that may be around a 9% depreciation, although highlighting that it is not foreseeable that this level will be exceeded and that there will be important differences between territories, which will lead to some specific areas with higher demand registering a 9% increase in price, although within a tonic of recovery from the previous level of transactions to the pandemic.
However, José María Alfaro has influenced the differences between different real estate markets in Spain, especially in those cities where foreign demand is more evident or have worse employment data. Meanwhile, in the rental market, he stressed that “the incidence of the coronavirus is different”, given that it is a market with a more exposed population and “with less job stability.”
Rent in the urban center is cheaper and the periphery is more expensive
This incidence of the pandemic, added to the changes in trends due to teleworking and the fall in tourist rental “has increased the supply in the main cities, while the demand does not grow, but changes interests”, which is motivating what some large cities, such as Madrid, “are experiencing a decrease of more than 10% or 15% in the current replacement demand “.
This change in interest leads Alfaro to forecast “moderate occasional increases, around 8% or 10%, in those properties located on the outskirts of the main urban centers that have a terrace or garden”, larger or with good connections by road or public transport, which represents a drastic change in the preferences of the tenants due to the impact of the coronavirus on their living and working conditions.
For this reason, the general coordinator of the FAI has assured that the norm that the Government prepares “arrives late”, highlighting that “any measure that limits rental prices will produce the opposite effect, expelling part of the population from the market” and pointing out that the rental problem is due to “the lack of supply in the main cities and the lack of legal security for the owners.”
In this way, Alfaro has proposed to solve this problem with incentives and tax credits for the offer of renting a habitual residence and promoting social housing, specifying that “one without the other is not enough” and that it should be the communities and not the municipalities that carry out these measures, given that the municipalities “are limited by criteria of solvency and economic sustainability,” he specified.
In addition, the expert has assured that “there is a unique investment opportunity in rehabilitation and accessibility of housing”, pointing out that the current park has an average age of 40 years and great deficiencies in energy efficiency and accessibility in regard to ramps and elevators, so the improvements will help swell the stock of rental homes.
The Euribor will remain negative in 2021 and the rise in subrogations will continue
Regarding mortgages, Silvia Escámez, co-founder and director of Prohipotecas, highlighted that the last year “has been very favorable for interest rates, with the Euribor at historic lows at the end of 2020 “, from -0.496, which has affirmed that” it has benefited consumers “, although it has indicated that it has risen in March to -0.40,” but the forecasts happen because it remains negative throughout the year, which is a good incentive for mortgages. “
Escámez explained that despite the pandemic, 333,721 home mortgages were formalized in 2020 compared to the 361,291 mortgages of the previous year, highlighting that the recovery in this market since the last quarter and that “the 17% drop in sales did not it is registered in mortgages, which have fallen by 7% “, a phenomenon that has been attributed to the 15% increase in mortgage subrogations, which is expected to continue in 2021.
However, the co-founder of Prohipotecas has indicated that there is a limitation of bank credit, although specifying that banks continue to bet on mortgages as one of the main customer acquisition products, despite having to charge more commissions to compensate for losses They are faced with such low interest rates and bad debt.
Regarding the types of mortgages, Silvia Escámez, highlighted that fixed rate mortgages have gone from representing 39% of the total in 2018 to 48% in 2020, while the average interest of this fixed rate has fallen from 2.5% in 2018 to fall below 1% in 2020 “which has led to improvements in mortgages”, although it has predicted that in 2021 “the conditions of mortgages will have to be adjusted upward “to compensate for the bank’s losses.
Escámez has also ensured that digital mortgages have been consolidated and that “more and more people are opting for this type of service to save time and money”, noting that it offers as advantages “greater transparency, lower prices, less linkage to more products, more deals and bargaining opportunities, and the convenience of being able to complete the process from anywhere, anytime. “
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