The real estate market 2022: forecast and expectations.

The real estate market 2022: forecast and expectations.

The real estate market is having a positive year. This was supported by rising transaction volumes and house prices. Given this evolution of the market, the outlook for next year is positive due to the economic situation, low interest rates and higher levels of household savings. In 2022, production, transactions and house prices are expected to continue to grow, albeit at a more moderate pace.

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Trade reaches pre-pandemic levels

Sales have grown this year, more than during the housing boom. In the first half of 2021, CB Richard Ellis data showed 319,000 homes sold, a 64% increase over 2020 data, with new construction accounting for 10%, topping 33,000. By the end of the year, it forecasts a 21% increase in transactions to more than 590,000 homes. From the economic point of view, there are also data that confirm the health of the real estate market. The forecasts of the European Central Bank suggest that financial conditions are optimal for home purchases. It predicts that the number of deals will grow next year, although the growth is likely to be more modest than in 2021.

New construction will continue to grow, throughout this year the recovery of the new market has been confirmed since the activity paralyzed in 2020 due to the pandemic has increased. Although the number of visas issued before the pandemic has not been reached, forecasts suggest that there will be some 85,000 by the end of the year, well below the 600,000 issued during the real estate boom. One of the obstacles in the current real estate market is the insufficient supply of new homes to meet the increased demand due to the pandemic. The new construction responds better to the new preferences of buyers who are looking for more sustainable and spacious homes with outdoor areas or good spaces for teleworking. Additionally, housing demand is solvent as household savings rates have increased during the pandemic.

Real Estate Market Forecast 2022

Added to these favorable circumstances, housing has re-emerged as a safe-haven asset amid stock market volatility, triggering a surge in property investment. Given the oversupply in the market, as well as the increase in material costs and land prices, experts point to an increase in housing prices in the coming months. From Bankinter they expect prices to rise 4% by the end of the year, somewhat less than 2% next year and 1% in 2023.

This trend will continue in 2022, with an average price growth of 4.3% and new construction (6.5%) once again above second-hand (4%). The biggest price hikes for new construction are evident in higher production costs, which have shot up 40-50%. Regarding second-hand houses, Ferran Font, director of research at piso.com, pointed out that the year will end with an increase of 2% to 3%, "which is expected given the rebound in demand from volatile markets to face the accumulated savings from inflation, while growth will be around 4%-5% in 2022”. The increase in new construction prices will be concentrated in Madrid, Barcelona, ​​the Balearic Islands, Valencia, Alicante and Malaga.

As for the areas where prices will rise, they will be greatly affected by the development of teleworking. Since the pandemic and during this year, the price has increased in the border areas of large cities as a result of teleworking, however, if you return to face-to-face work, the demand for housing in these areas could drop, which would affect the price at the low.

Rental growth and rehab

In the rental market, according to CBRE estimates, in 2025 there will be millions of rental homes, which represents a percentage of the rent, which will be concentrated mainly in large cities where access to purchase is more difficult and due to socio-cultural changes that drive pay-per-use. However, the evolution of the rent will be conditioned to the implementation of the housing law whose approval is not expected until the second half of 2022.

No real estate bubble risk

Although the fear of a new real estate bubble hangs over the sector due to the growth in activity, the truth is that the conditions for this situation to occur do not exist.

According to the Bank of Spain, although the price of housing is above what it cost before the pandemic, the financial risk is low because there is no credit bubble as in the real estate crisis. The tightening of financing conditions imposed by banks on developers has prevented over-indebtedness, which has also caused a certain delay in carrying out some projects.

In addition, the volume of finished homes is more moderate, which allows it to be absorbed by demand. The demand is higher than the supply and no growth in supply is expected due to the limited production capacity due to the scarcity of land and the lack of labor. The challenge for the real estate market in the coming year will continue to be facilitating access to housing for young people and the most vulnerable sectors, for which public-private collaboration is needed.

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