Spain | Recent developments in the mortgage market

Summary

Despite the fall in GDP in 2H20 (-9.0% YoY), housing sales rose by 2.4% and mortgages by 5.1%. However, many of the factors supporting sales may be temporary. Towards the second half of the year, the sector could show a vigorous recovery. Its fundamentals are solid.

Key points

• Key points:
• The rebound in the housing market has been surprisingly strong. In the second half of 2020, GDP contracted by 9.0% compared to the same period of the previous year. In contrast, housing sales rose by 2.4% and mortgages by 5.1%.
• The recovery seems to be supported by several factors. There is pent-up demand due to mobility constraints and increased economic uncertainty. There is a shift in preferences towards larger homes. There is an excess of savings and low returns on financial assets. Rental prices have risen sharply in recent years, while financing conditions remain lax.
• Many of the factors supporting sales may be temporary. Housing sales and the number of mortgages continue to fall over the year to date (the losses have not been recovered). Economic and pandemic uncertainty remains high; employment is not expected to rebound strongly in the short term; financing conditions will not improve further; external demand will continue to be very limited; prices are expected to fall; and the regulatory environment remains adverse.
• Towards the second half of the year, the sector could show a vigorous recovery. Its fundamentals are solid.

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