The first downturn in home prices will come at the end of the year due to the real estate storm.

For more than a decade, home prices have been rising, but that ended this year. Analysts suggest that in the current environment, driven by rising mortgage rates, high core inflation and tighter credit, home prices could moderate as much as 5%. Because of these changes, consumers are less likely to buy a home. Everyone expects changes in 2024. Experts predict a continued decline in business activity and real estate sales due to rising interest rates, although no one is predicting a crash. 2022 was an unusual year for home buying, and some believe that a change in the political climate of government could affect real estate if a new housing law is repealed, anti-foreclosure policies are strengthened, or measures are introduced to improve rental housing affordability. Regardless of the political changes, the next Legislature should address housing affordability for Spanish society.

As for prices:

In the sales market, prices will probably stabilize by the end of the year, but no exact figure is given. Prices are expected to rise by 0.5-1% by the end of 2023, or fall by 2%, according to different experts. Gonzalo Bernardos predicts a 5% drop in prices by the end of the year and an additional 3% drop in the first half of 2024. Secondary housing prices may increase by around 7% this year, but will decline more markedly in the medium term compared to new buildings.

As far as the rental market is concerned:

Prices will continue to rise due to the difficulty in buying a home. Since the beginning of the year, prices have risen by 20% in some areas, but growth has now slowed.

The next government must address the problem of housing affordability as the demand for housing continues to rise and supply is not meeting the demand. Experts believe that more public housing is needed.

The development of the construction sector must go hand in hand with the legal security of the private sector in order to find consensus among all social actors and overcome transience and low wages. Experts believe that price controls will not solve the problem, but only promote the black market.

Figures for sales and new mortgages are predicted to fall in the second half of the year. The number of sales could fall by 150,000 from 2022, and new mortgages will also fall due to higher rates. However, this is all a return to normal levels after the pandemic. Many analysts believe that buying real estate is still a way to keep savings and confidence in income stability.

The return of tax deductions in personal income tax for the purchase of a primary residence has been proposed as a measure to help families during the period of rising mortgage rates. However, experts do not consider this measure effective, as it is unfair to the least well-off families and prioritizes the wealthier ones. They believe that more effective measures are land liberalization and tax incentives for owners renting out housing to a certain category of population.

The program on energy efficiency and sustainability of housing is under implementation in the country. One risk is that renovating housing to achieve higher energy efficiency may lead to higher prices for new housing and rent. Different studies show that houses with the highest energy certificate (class A) can be up to 20% more expensive. To avoid such price increases, it is necessary to provide assistance and subsidies for energy renovations and to ensure a level playing field for access to the housing market.

Important points:

• Home prices could moderate to 5% due to rising mortgage rates and tightening credit.
• It is expected that housing prices will rise by 0.5-1% by the end of 2023, while prices for secondary housing may increase by about 7% this year.
• Rental prices will continue to rise, especially when the school year starts in September.
• The next government must address the issue of housing affordability and increase public housing.
• Price control won't solve the housing affordability issue; we need to overcome the temporary nature and low wages in the construction sector.
• The number of real estate sales and the volume of new mortgages may decline in the second half of the year.
• Buying real estate is still a way to preserve savings and ensure stable income.
• The return of tax deductions for home purchases is not considered an effective measure; instead, it is necessary to liberalize land use and provide tax benefits for property owners renting to certain categories of the population.
• The energy efficiency and housing sustainability program may lead to an increase in prices for new housing and rentals; assistance and subsidies for energy renovations are needed.