He housing prices begins to show the symptoms of exhaustion that were expected. Although last year ended with a average increase of 7.4%, the highest since 2007, the last quarter of the year revealed signs of weakness. According to data made public today by the National Institute of Statistics (INE), between October and December, prices grew by 5.5% compared to the same period of the previous year, which is 2.1 percentage points less than the year-on-year growth registered in the third quarter. Furthermore, in the last quarter of the year, prices fell 0.8% compared to the previouswhich represents the first setback since the fourth quarter of 2020. In the case of the used housingmajority in the market, prices fell 1.4%the worst rate since the first quarter of 2013, according to the INE.
“The drop in the price could indicate the beginning of a moderation in the growth of the cost of housing. In December 2022, up to four rate hikes had already been carried out by the European Central Bank (ECB), and the Euribor was already exceeding 3% This situation of so sudden increase in the cost of financing, added to the inflationary tensions, is already beginning to have an effect on the pockets of families, who they increasingly lose purchasing power, which influences the purchase demandwhich, although it continues strong, it is probable that a high percentage have already discarded the idea of buying in the short term”, explains María Matos, Director of Studies and spokesperson for Fotocasa.
Rising mortgages
The fourth quarter, as Matos adds, was marked by the biggest rise in mortgage prices since 2000, and due to the fastest rise in the Euribor since the existence of the euro. This casuistry, he adds, although it seems contrary, “has further accelerated the purchasing situation of citizens, who have rushed to close the purchases before the conditions of the loans become even more difficult.”
The big question is whether this moderation, as Matos explains, may indicate the start of a more sustained price correction. A question for which experts do not have a clear answer. “At the moment, no significant price drops are expected and it is still too early to assess whether the quarterly decline will become a trend”says Matos. What is certain, he adds, is that “the tensions between supply and demand will make a correction difficult. Interest in buying is still above pre-pandemic levels, and the reduction in supply during this past year will make it even more difficult to reach a balance quickly “. In 2023, he explains, “it is likely that fluctuations in the cost of housing up or downsince the market will seek to adapt to the new change in monetary policy, and some adjustment is even to be expected from the second half of the year, but far from large declines”, comments María Matos, Director of Studies.
Ferran Font, head of Studies at Pisos.com, affirms that “the forecasts for 2023 are that continue with this trend to less and less substantial growth, even reaching falls in those less dynamic markets where there is no strong demand that pushes prices up”.
The start of the year points to price containment. The Tinsa appraiser has pointed out this week that prices fell 0.1% in February compared to the first month of the year although, in the annual rate, they advanced 6.4%. The appraiser, like Fotocasa, considers that “the accumulated erosion of inflation in the purchasing power of households and the increase in the cost of financing limits general demand, especially in those households with lower incomes,” said the director of the Service. de Estudios de Tinsa, Cristina Arias, to justify this decline in the market and the fall in prices.
