Rent will rise by 12.5% this year and the price of used housing will accelerate its rise until it grows by 5% at the end of 2024
The price of housing has not yet reached its ceiling, according to the forecasts of the Spanish Association of Value Analysis (AEV), which includes the main national appraisal companies and this Tuesday published its XX Valuation Observatory. Neither used housing nor new construction will escape rising prices in the coming months. In fact, second-hand apartment prices are expected to accelerate their rise throughout the year until closing in 2024 at annual growth rates close to 5%, slightly below the rise predicted for new housing. The rise in rents is expected to be even more pronounced.
The report published this Tuesday, signed by the head of the Department of Applied Economics at the University of Alicante, Paloma Taltavull, and prepared in collaboration with fifteen experts, points out that rental income will maintain a constant growth rate throughout 2024, consolidating at average levels 12.5% higher than those recorded last year. This increase is attributed to the growth of demand at a greater speed than supply, driven mainly by the creation of households and the arrival of migratory flows, as well as their concentration in stressed areas. While the volume of people looking for an apartment continues to grow, the supply of housing on the market has been reduced, while the conditions for accessing the purchase have been tightened.
The AEV analysis also recalls that, in the last year, new rental contracts have become more expensive on average by 10%, double the current contracts, which rose 5% despite the limitations imposed by the Government. In 2023, annual rent updates were capped at 2% for properties in the hands of large holders. The report points out that this restriction has caused a transfer of part of the supply to the purchase and sale market, while the apartments that have entered the rental market have done so at higher prices. 90% of the AEV analysts who have participated in the report and 60% of the experts external to the association rule out that the price caps derived from the housing law could serve to relax rental price levels beyond of the initial short term, by restricting supply.
For its part, the AEV analysis indicates that Used home prices will accelerate growth throughout the year and they will reach interannual rates of 5% at the end of 2024 after starting the year with increases of around 4%. However, the report conditions this increase on the maintenance of current employment levels and the decrease in interest rates by the European Central Bank (ECB), which undertook its first reduction in June almost two years after it began to raise them. to try to curb inflation. Lower interest rates would lower the conditions for accessing financing, thus making the purchase of a home with a mortgage more accessible.
As for new housing, its prices are expected to rise by around 6% in the middle of the year and subsequently moderate towards the end of 2024. Also in this case, the report attributes the rise to the shortage of supply due to the slowdown in the construction sector. The lack of sufficient new construction will predictably continue to push up prices, especially in coastal areas and in large towns and their metropolitan areas. “The structural problems of the Spanish real estate market, far from being resolved, continue to fuel the disagreement between supply and demand, which prevents price tensions from relaxing in the main cities. It is urgent to implement medium and long-term plans that help correct the shortage of supply, both for sale and rental,” assesses the general secretary of the AEV, Paloma Arnaiz.
“Insufficient” financing
Despite the rise in prices, the real estate market is resilient. The AEV report suggests that, after falling 11% in 2023 to 639,000 operations, Home sales will grow in the coming months, driven by the containment of inflation, the relaxation of interest rates, the gradual increase in salaries, the recovery of savings rates and the strength of the labor market. At the moment, according to INE data, in the first quarter of 2024 sales fell by 5.6% compared to the same period of the previous year.
![photographer: CONTRIBUTOR 2 [[[PREVISIONES 20M]]]topic: Resources: Real Estate, Housing, For sale, For rent. Mortgages. Rent. Sale of flats.](https://imagenes.20minutos.es/uploads/imagenes/2023/05/03/fotografo-colaborador-2-previsiones-20m-tema-recursos-inmobiliarias-vivienda-se-vende-se-alquila-hipotecas-alquiler-venta-de-pisos.jpeg)
However, despite the resistance of the real estate market, the analysis published this Tuesday indicates that, with current levels of demand, the current size of the mortgage market is “insufficient”, since it has decreased by 40% since 2008. In this sense, the author of the report links the lack of financial support for the purchase of an apartment to the worsening of access to housing. However, on this point there are disagreements with the rest of the analysts, who are inclined to point out the scarcity of land where demand is concentrated as the main brake on market growth, as well as the atomization of the development sector, which limits its capacity. financial with own resources.
“Financial flows continue to be systematically reduced to the construction sectors, but also to the final buyers, so that the sector does not identify solvent buyers for the purchase,” explains the report. “The lack of credit prevents households that need housing from being able to buy (despite having the ability to pay), and therefore the signal is not sent to the promoter sector to start new works. We are facing a vicious circle that will have to be resolved, maintaining the risk limits that are necessary,” he concludes.
