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17/03/2021

The situation on the real estate markets and forecasts for 2021 and 2022

The situation on the real estate markets and forecasts for 2021 and 2022
The American rating agency Standard & Poor's (S&P) has published a new report in which it assesses the most important real estate markets in Europe. From this report, we learn, among other things, that property prices in Spain in 2020 finally increased, going from a 1.4% decline last October to – ultimately – an increase of 1.6%.

"Prices in 2020 were more dynamic than in 2019. This was due to high demand and weaker supply, despite the biggest economic downturn in decades," S&P analysts explain.

They sum up 2020 by saying that prices have increased significantly in Sweden (10.1%), the Netherlands (8%), Germany (6.9%), Great Britain (6.7%) and Portugal (6.1%). Spain remained in the group of the most moderate increases in the pandemic year. Its 1.6% is only higher than the result of Ireland (1%) and Italy (0.5%).

The credit rating agency is also assessing the policy measures in place in Europe to combat the pandemic, as they are "probably the most effective in maintaining housing demand."

As examples, S&P cites activities targeted at the housing market in Great Britain and Sweden. In the first case, the home purchase tax exemption for the first £ 500,000 (€ 578,000) significantly increased the activity of buyers, which resulted in higher prices. Meanwhile, in Sweden, the mortgage payment requirement has been suspended for most buyers.

"Both measures contributed to price increases in the second half of 2020 (after the first wave of coronavirus), but they will also lead to a correction when they are eliminated this year (in April and September, respectively)," the agency's analysts emphasize.

Forecasts for 2021: slowdown and slower price growth

In 2021, the market will absorb pent-up demand that has arisen due to restrictions applied in various countries. However, the estimated increase in prices will be more moderate due to worsening access to housing and the reduction of economic activity in the face of the current uncertainty.

Overall, the rating agency forecasts more moderate price rises in 2021, with only the UK (-2.3%) and Italy (-0.5%) forecasting declines. The highest expected increases this year will take place in Germany (5.3%), the Netherlands (5.2%) and Sweden (4.5%), while Spain will remain in the group of countries with the most moderate increase in real estate prices with a score of 1.4%. France (1.5%) and Belgium (1.8%) are in the same group.

"When the impact of the pandemic on European economies begins to diminish, some of the unusual support for the housing market in 2020 is likely to expire," S&P experts assure. "Economies are unlikely to reach pre-pandemic levels before mid-2022, which in turn will delay the full recovery of employment by 2023."

Demand will be weaker in countries like Spain and Portugal due to restrictions on international travel.

A rebound in prices in 2022... if we get out of the pandemic crisis

Any economic recovery, and hence the housing market, depends on vaccines and their effectiveness. Additionally, this year, S&P predicts "a recovery in housing demand and an increase in prices as a result of a possible easing of the constraints associated with the pandemic. This should pave the way for sustained economic recovery and employment growth.”

In the case of the real estate market, it is time for those families who managed to save in 2020 to use some of their savings to renovate the home they currently live in. Savings have risen to unprecedented levels since 2020, largely due to temporary store closures and the cancellation of recreational activities. "Savings have increased more for those who earn more, that is, those who are more likely to climb the property ladder, which drives housing demand," S&P analysts explain.

According to data from the European Commission, the desire to buy a home is at its highest level in the euro area since 2003.

Referring to the growing demand for apartments outside large cities, the credit agency also believes that "it is to be expected that cities will continue to be attractive to homeowners. Even if teleworking remains as popular as it is now, large cities are and will continue to be centers of economic activity, with better employment prospects and infrastructure, especially in the areas of health and leisure. '

The forecasts for 2022 are much more promising. The price increase in Spain should amount to 4.3%, which will move it to the top, next to Germany (4.9%), Portugal (4.7%), Ireland (4.5%) and the Netherlands (4.3%).

[source: Idealista.com]

Our comment on the article:

2021 will undoubtedly be a very interesting time on the Spanish real estate market. Brexit, the ongoing pandemic and buyers who have postponed buying property in Spain due to the coronavirus – these issues heavily affect the Spanish real estate market in 2021.

In 2020, the pandemic caused many people who were planning to buy real estate in Spain to postpone their decisions. These buyers are waiting to be able to travel freely and have high hopes for the vaccine. They declare that they plan to come to Spain and buy real estate as soon as it is possible without quarantine. However, this is only one side of the coin.

The second is the group of buyers who, after the first lockdown, said that they prefer to spend each possible subsequent lockdown at their home in Spain, where they will have sun, beautiful weather and the possibility of going out to the garden. This group also includes many people who have been dealing with the decision to buy a property in Spain for months or years, but have not implemented their idea so far due to the need to show up at the office every day or look after their own business. Lockdown has shown that you can work just as efficiently from your home office, which may as well be in some nice, warm place – like Spain, for example.

An interesting case is the British, over whom in 2020, apart from the pandemic, the specter of the imminent Brexit is still hanging. This group of buyers decided to buy property in Spain often without arriving, based on photos, videos, descriptions and documentation of the property provided by brokers.

When it comes to prices, the lack of general drops does not mean a lack of bargains – especially in the secondary market. Already in the second half of last year, the trend of more openness of sellers to accepting offers was noticeable. Offers that were 10 or sometimes 15% lower than the initial prices were accepted. The higher the shelf of the property, the lower the percentage of discounts.

So how to navigate the Spanish real estate market in 2021? Watch the market, read offers carefully, ask questions. Also, look for a proven broker who will become your market guide and guarantee the security of your transaction. And don't believe in mega-bargains. If something seems too good to be true, it usually is.