Spain | Where are house prices heading?

Today, as recession looms and inflation rears its head, we are likely to see a return to a somewhat gloomy housing market, even if house prices do not actually fall. But how hard will the adjustment be this time around?

Key points

• Key points:
• Compared to previous price falls, two differences should be noted: the first is that a short-lived and low intensity recession is now expected; the second is that the potential downturn will not occur in an environment where there is an imbalance that needs to be corrected.
• This crisis is expected to be relatively mild and short-lived. The accumulated gas inventories should be enough to avoid any rationing and expectations of quieter levels of economic activity have caused fuel prices to stabilise.
• The bottlenecks affecting the industry seem to be clearing. The cost of money cannot rise much further in a context where a turning point in inflation can now be seen on the horizon and a recession is expected; and investment will be supported by Next Generation EU funds.
• Moreover, both households and construction companies have made it through a difficult deleveraging process that now leaves them in a healthier position, and the financial sector is adequately capitalised and has limited its risk-taking.
• In addition, there is no oversupply that could exert downward pressure on housing values indefinitely. In fact, several factors have limited new construction starts in the last two years, while demand has grown.

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