Housing is not exempt from the price tensions that have plagued advanced economies in recent times. The sector has spent months showing a vitality unknown since the times of the bubble, with records in sales transactions and mortgage granting, and that in the end ends up translating into more expensive houses. This is what happened in the first quarter of this year, when housing became 8.5% more expensive compared to the same period last year, according to data published this Wednesday by the National Institute of Statistics (INE). The percentage is not anything: once again we have to go back to the wild years of the first decade of the century, specifically to the third quarter of 2007, to find a time when the price of flats in Spain increased faster.
In the years prior to the pandemic, the maximum growth that house prices reached in year-on-year terms was 7.2%, during an episode of market warming between the end of 2017 and the summer of 2018. Then the sector it cooled down and the pandemic led to lethargy. But the awakening is being abrupt and at the moment, as happens with inflation, it is not clear what its ceiling will be. Since the end of 2020, houses have been rising for five consecutive quarters.
On this occasion, it also highlights that the rise is quite homogeneous both between new and second-hand housing, a reflection that the high demand is tensing the market as a whole. The amounts of brand new houses, however, increased more: 10.1% in the first quarter. But the used ones, which account for the vast majority of sales (a notable difference with what happened in the bubble, according to most experts) have become more expensive by 8.2%.
The Housing Price Index prepared by the INE is an indicator based on 100 that takes as a reference what a house was worth in 2015. In the first quarter of this year, it attributes a value of almost 139 points to housing. This means that the price is 39% more expensive than in 2015, but it also allows you to compare it in historical terms with previous years. Following the historical series, current prices can be compared with those of the beginning of 2009, but they are still below the levels reached at the height of the bubble (almost 152 points, in the summer of 2007). Although here there is a notable difference between the new work (at historical maximums, with more than 153 points) and the second hand, which is still far from the peak of 15 years ago (now it reaches 136 points, far from its record of 169 points). ).
Rise in all communities
The warming of the sector, however, is a fact and it is also quite homogeneous. In all the autonomous communities, house prices began the year rising faster than they did at the end of 2021. However, the rates differ between territories and only six communities (Balearic Islands, Cantabria, Canary Islands, Andalusia, Murcia and the Valencian Community), in addition to the two autonomous cities, presented in the first quarter a percentage increase in prices higher than the national average of 8.5%. In the first four, in fact, the price increase was in double digits, with the Balearic Islands marking the highest year-on-year rate (12%). At the opposite extreme, the houses only rose 6.3% in the Basque Country.
He knows in depth all the sides of the coin.
“We are facing a new boom to buy,” says the spokeswoman for the Fotocasa portal, María Matos, in a communication sent to the media in which it is highlighted that housing is experiencing “the highest year-on-year rise since the real estate bubble.” However, Matos sees differences compared to then because “there is no longer an excess of product, but rather a shortage of stock”. In other words, there is “a great imbalance between supply and demand” that will hardly be alleviated with new construction because Spain builds much less than at the beginning of the century and also “the moment of crisis in the West has caused the price of materials to rise”, which is causing “the supply of new construction is slowing down and taking much longer than usual to reach the market”.
José García Montalvo, Professor of Economics at the Pompeu Fabra University, recalls that “the tension in the markets for the sale of housing, and also for rental in large cities, is global”. “In the Spanish case”, explains the expert, “the price acceleration process began later, but it could extend further, since the rate hike by the European Central Bank will have a limited effect on the cost of mortgages and will still there is a large amount of accumulated savings and the desire to change homes along with a demand for investment”.
Matos points to similar reasons to explain why “housing prices refuse to go down”. But in a few months, García Montalvo believes that a change can take place, derived from the worsening of the economic situation: “It is foreseeable that the consequences of the war in Ukraine and the rise in interest rates, which is expected to be very rapid in many countries, although not so much in the euro zone, ends up containing the growth of prices”, points out the professor.