November 15, 2022

Analysis and forecast for the real estate market

Last weekend it was time for the annual real estate fair, SIMED, in the Congress Palace in Málaga. On Friday, we were invited to a major seminar for realtors by the housing portal Idealista, where experts analyzed the situation and predicted the future with a deep dive into statistics, prices, threats and strengths in the Spanish real estate market. Of course Felicity Estates was there!

It was packed in the big hall with around 600 agents from all over Andalusia. The program included sales, rentals, new concepts and new thinking in the industry, as well as training in how to treat clients in the best possible way in an increasingly digitized world. Carlos Rueda, head of business training at Idealista, was first out and started by showing statistics for the very potent housing market of the recent years.

The current year is estimated to close at around 746,000 sales, which is a lot but still 21 percent below the previous real estate boom 15 years ago. Which gives a hint that there is still room for a continued rising curve. The Málaga province is expected to reach historical records this year with approximately 46,500 transactions.

As for prices, they have generally risen in Spain by an average of five percent in the past year, which is seven percent below the previous property peak. In Andalusia, they have risen by 6.4 percent, which is 1.9 percent less than the previous peak, and in Málaga, they have risen by 13.6 percent. This means that prices are now close to 33 percent above the highest level 15 years ago.

Despite record numbers and the fact that the industry is doing well, as everyone knows, there are also some dark clouds in the sky. The first threat was actually stated to be the media, which constantly tries to make it look like the real estate industry is on the verge of a crisis. The next threat is of course the rising interest rates. However, Carlos Rueda said that an Euribor of 2-3 percent is actually completely normal and that it is not the interest rate itself that is the threat, but that many people think it will drop again and thus wait with a home purchase. Another problem is that more loan applications are denied, in January it was only 1.8 percent and in November the level had risen to 16 percent.

What is important to take into account however, is that there is no risk of bank financing being cut off, as it was during the last crisis. One reason is that approximately 50 percent of the borrowers have a fixed interest rate and no risk of a bank collapse. A final threat is actually the difficulty of finding good homes for those who want to buy, as the supply is very low. The housing stock has decreased continuously in the recent years, which can be interpreted as a good time to sell despite the other threats on the market.

These are relatively troubled times in the world, although the Spanish economy is currently strong and the growth is positive. So what are the strengths of the Spanish property market? First of all, it is said to be a robust sector. As for the city of Málaga specifically, it is becoming more and more trendy every day, not least thanks to several multinational companies such as Google, Vodafone and RavenPack that have set up their offices here. The demand for real estate is high and increasing.

In a list of the countries where European capital investors are most likely to buy properties in the next twelve months, Spain ranks third after Germany and France. Foreign demand is at historic record levels, 40 percent of all transactions in the Málaga province are made by foreigners and Idealista's analysts believe it will rise even more. When it comes to the luxury segment, 23 percent of all residential sales of at least one million euros are made in the Málaga province, and a whopping 37 percent of all sales of at least three million euros take place here.

Daniel del Pozo, head of Idealista Data, presented new values for the real estate industry to consider in order to stay ahead. These are ESG - Environment, Society and Governance. Among other things, more and more clients are said to be prepared to pay more for an energy-efficient home, and so-called green certified agents, which already exist in for example the United States, are about to become a reality in Spain as well. 

When it comes to environmental issues, for the agents it is important, among other things, to inform and rise awareness of the energy certificate, informing about the benefits of renovation, including costs, value increase and improved energy efficiency. Idealista even has a tool where these calculations can be made quickly and easily www.idealista.com/reformas/.