The increase in interest rates on mortgage loans is slowing down the Spanish real estate market, but the decline in sales in the first half of2023 is not as steep as expected - Olive Press News Spain.

In the first half of2023, an increase in the interest rate, which makes mortgages more expensive, slowed down the Spanish real estate market.

According to the National Statistical Institute,315,783 residential houses were sold in the first half of the year, which is4.5% less than the same period in2022. A year ago, Spain experienced a construction boom, which began to slow down towards the end of2022..

Experts describe the latest housing sales data as "good" or "better than expected". After a two-year slump following the peak of the Covid pandemic, the number of sales is on par with what was seen in2008, with over300,000 residential homes sold in the first half of2022.

Expert forecasts

Jose Maria Alfaro, president of the Federation of Real Estate Associations (FAI), said: "With such an intense increase in the Euribor mortgage rate by four points in a year, to talk about a decline in sales of less than 10% seems a more favorable situation than we predicted four or five months ago." Alfaro believes there will be a 10% drop in sales for the year, compared to 650,000 transactions last year.

Xavier Kindelan, head of consulting firm CBRE, believes the decline will be much greater. "The total number of sales will be down by about 24% by the end of the year," he predicts. "The market has behaved better than expected in early 2023, but we expect rising interest rates to have a bigger impact on slowing sales later this year," Kindelan says.

Trends in the real estate market

Both experts agree that the market will continue to decline over the next few months, with data from notaries at the end of June showing a 12.9% drop in transactions.

Reasons for lower sales

Teresa Barea of the General Council of Notaries said: "The reduction in mortgage lending means that there are people who cannot get finance to buy and there are also potential buyers who, because of the economic situation, decide to postpone their plans."

Real estate agents are also seeing clients delaying purchases, according to Jose Maria Alfaro. "Agents are getting a third of the inquiries compared to a year ago, but it's not that the property isn't selling, it's that it's taking longer," he said. "If a year ago you sold a house in 30 days, now it takes 60 days."

Results

The decline in real estate sales in Spain slowed in May according to the latest data. Residential home sales in Spain rose by 14.7% in 2022 - the highest figure since 2007.