Inflation and rising rates cause the real estate market to suffer a slight slowdown in 2023. Pedro Soria, commercial director of Tinsa, analyzes what happened this year and tells us what the situation is on the market in 2024.
What analysis do you make of the evolution of the real estate market in 2023 and what are the prospects for 2024?
The macroeconomic situation, marked by inflation, has a clear reflection on the evolution of the real estate market, which shows a slowdown in purchase operations. Various sources and statistical data that measure the situation in the real estate market show that the increase in interest rates has an impact on the sector, although perhaps with less intensity than expected. The sector is in a state of slowdown and moderation in its activity, after a very active 2022, which is a record. This is a situation that assumes a normalization of the market in line with the historical average of activity in recent years. The rapid and sharp increase in the cost of financing slowed down the provision of mortgages, which fell even more than sales, which developed in the context of low production of new houses and a sharp increase in demand for alien The situation encourages us to be cautious, because of a trend of moderation that will continue for the rest of the year. Looking ahead to 2024, I defend moderate optimism: the ‘engine’, which is demand, will continue to be active, albeit to a lesser extent. In any case, the macroeconomic situation, the evolution of inflation and interest rates will determine the evolution.
Do you think the search for the house as an investment in the safe value of the safe continues to happen?
Housing continues to be a safe haven of choice for many investors in inflationary contexts such as today. The profile of the buyer with savings, who is less affected by these inflationary tensions, and who in many cases does not need financing for the purchase of the house, chooses to invest in housing so that it can be profitable by renting, because in the scarcity of the product and the very high demand, in traditional rentals and in tourist rentals, which continue to report attractive returns.
The situation is very different when we talk about new and second-hand housing. How is each market progressing?
Despite the overall strength shown in demand, this asymmetry continues to be observed between the new construction and used housing markets. In new construction, insufficient supply continues to drive up prices, driving some of the demand into used housing. The current economic situation and the increase in interest rates undermine part of that demand, with a greater impact on this part of used housing, where prices, although they continue to rise, are expected to do so in a more modest way.
As appraisal experts, how is the price curve expected to evolve for new construction housing?
The production of new construction houses in our country is very low. The approval and start of new projects is much lower than the construction of new houses, and this means that the limited supply of new houses being built has an outlet, already in a good very fast in the face of a very active demand. In this sense, prices clearly show resistance to falling, and the trend continues to be a moderate and continuous increase in the context of a lack of supply, and an increase in the cost of production, due to the increase in the cost of materials and labor. . In addition, the raw material (the final soil) continues to be in short supply in areas with strong and active demand.
What analysis are you doing on the rest of the Real Estate sector?
The real estate investment market is once again in a state of ‘wait and see’, which is highly conditioned by the increase in interest rates, which causes a decrease in the value of properties. The investor demands a greater profit, causing a mismatch of expectations between the buyer and the seller. The conclusion is a reduction in the amount of investment in general. Although there is some caution waiting for prices to stabilize, we are in a moment of opportunity for some properties or long-term investment profiles, which can access those property with less competition and better conditions, without becoming an opportunistic market. The city of Malaga continues to remain among the most frequent bets of investors, who choose it for large projects, positioning itself as one of the Spanish cities with the greatest growth prospects.
Are sustainability and improved energy efficiency already included by prospective buyers when purchasing a home?
Sustainability and energy efficiency are fundamental aspects and represent a real challenge at the national level, because our real estate stock is obsolete. Awareness about sustainability and care for the environment is clearly growing. Today’s buyers are clearly interested in energy efficient and technologically ‘green’ properties. This has already influenced the supply and demand of properties with these characteristics, and is another of the strengths of new construction compared to built stock. The problem of high energy consumption helps to focus on the rehabilitation of housing, beyond the current opportunity of Next Generation funds, because the future European regulation will help those who have not decided to make the decision. In this way, in Tinsa we created Agentia R+, a company that promotes these residential rehabilitation projects.
Tell me about Agentia R+, the company in Tinsa that acts as a rehabilitation agent.
The Agentia R+ project is very exciting, and focused on contributing our grain of sand to improve the energy rehabilitation and improvement operations of the residential park. Agentia R+ works as a rehabilitation agent, responsible for comprehensive financial management, the application for public assistance based on the Next Generation European Funds, as well as the management and/or preparation of technical projects etc. more documentation or action required for the full development of residential energy rehabilitation projects. The aim is to provide a global service of the highest quality. The strength and specialization of our brand in this type of operations exponentially raises the quality standards and service capacity, providing the experience and knowledge for efficient advice and comprehensive management of the entire process, with a 360º global vision and unique dialogue, project management through a ‘turnkey model. We like to say: ‘we take care of everything’, with the aim of providing a more efficient home.