Spain | Real Estate Watch. First half 2022

In the coming months, the real estate sector will be conditioned by the downward revision of economic growth, the war in Ukraine, the shortage and high inflation of construction materials, the foreseeable rise in interest rates and the persistence of regulatory uncertainty.

Key points

• Key points:
• The greatest impact of the war will come from the increase in the price of raw materials and its effects on production costs and inflation. The increase in the price of construction materials is reducing companies' margins and is beginning to be passed on to the final price of investment projects. This may continue in an environment of increased demand, driven by the NGEU plan and changes in home buying habits.
• Interest rates will rise faster than expected a few months ago. The persistence of inflation has led to an earlier normalization of monetary policy and the 12-month Euribor is expected to end the year in positive territory. In any case, financing conditions will continue to be favorable for both households and companies.
• Regulatory uncertainty continues to increase. Some aspects of the new housing Act or the restriction on raising rents more than 2% could result in greater informality, additional price increases, reduction and deterioration of the available rental housing stock and social exclusion.
• Several factors point to a slowdown in sales growth over the coming months, so a slight drop in transactions is expected for the year to date (-1.3%), to 670,000 units. The downward revision of the macroeconomic scenario, the uncertainty derived from the war conflict, the moderate increase in interest rates, the growth in prices and the lack of availability of unsold new housing. Growth will return in 2023.
• The shortage of new supply and the recovery in demand will drive housing starts in 2023 (21%). Meanwhile, the high level of sales and the rising cost of construction materials will support housing price growth in the next two years (5.0% in 2022 and 5.8% in 2023).

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