What about the Spanish real estate market AFTER COVID-19?

Meanwhile, about 1 month after the announcement of the alert phase and the complete isolation in Spain, due to COVID-19, economic real estate experts are drawing cautious conclusions about the future for the Spanish real estate market.

Based on an article by "Idealista" namely; "Qué pasará con la vivienda post covid-19: caídas de precios, de ventas y recuperación en 2022?", published on April 15, 2020.

The impact of the crisis on prices on the Spanish real estate market

To start with, several great economic experts point out that the current crisis, caused by COVID-19, has nothing at all to do with the banking crisis of 2008! The impact of the current crisis on the real estate market is paralysing and direct, while in 2008, the ever growing real estate bubble in Spain burst mercilessly!

The second-hand real estate market

Both Gonzalo Bernardos (economist and professor at the University of Barcelona), Raymond Torres (Director of International Economics and Economic Analyses of the company "FUNCAS") and Carlos Ruis (IEE or the Institute of Economic Studies) estimate that residential property prices will fall by about 5-10% by 2020 in correlation with the GDP (= Gross Domestic Product) of Spain. Because real estate owners/sellers who are in need of liquidity due to the current situation must be taken into account. However, real estate prices are also expected to increase by about 7% during 2021, in correlation with GDP.

However, the "reliability factor" of real estate will possibly compensate part of this decrease. After all, stock markets remain volatile and investors cannot find alternatives in obligations or deposits.

Also, "Mikel Echavarran" (CEO of "Colliers International Spain") adds that it is currently impossible to evaluate the impact on the average price of second hand homes. With more than 1 million unemployed, it's like going back two years on the real estate clock, given that job creation in the last two years has reached a similar level. And therefore, it can be estimated that the drop in the average price of second hand homes could be around 10%, going back to the average prices two years ago.

The real estate market new build homes

According to "Luis Coral" ( CEO "Foro Consultores") and "Mikel Echavarran" (CEO "Colliers International Spain"), the new building prices will NOT evolve like the prices of second-hand houses. Because the supply of new houses is scarce compared to the second-hand homes that represent 4/5th of the Spanish real estate market. Developers will not feel any pressure to lower prices, while some private property owners will be under financial pressure due to the current situation and will be forced to lower prices.

The impact of the crisis on the sale of the Spanish real estate market

Gonzalo Bernardos, economist and professor at the University of Barcelona, suspects that the number of sales in the real estate sector will most likely fall by almost 20% by 2020 and possibly recover by 14% in 2021. However, the demand for housing has not been eliminated because there are still buy-sell closures, but the truth is that we have to wait until the uncertainty has been clarified.

According to "Raymond Torres", Managing Director of International Economy and Economic Analyses of the company "FUNCAS", the recovery of the real estate sector will statistically not be according to a "V" but according to a "U". It is also suspected that, by the end of this year at the latest, foreigners will return to Spain to invest in real estate. A full recovery of the Spanish economy is expected in 2022-2023.

The impact of the crisis on the Spanish rental market

The rental market is also suffering from the current situation, but on the other hand, "Sandra Daza" (Gesvalt) emphasises that this situation, once the alert phase has been lifted, will lead in short term to a fall in renting prices due to the reduced rental demand and with a progressive recovery in the following months.

It is expected that the tourism sector will undoubtedly be hit hard, but also that the rental market will be extremely flexible and fast. Of course, here too, everything depends on what measures the Spanish government will take for the coming period and once again we can do no more than wait until the current uncertainty has been clarified.