Rising rates drive purchases forward and new home prices soar

The residential real estate market is heading for an uncertain decline, but so far he continues to show his resilience. The sector closed another memorable first half, despite the inflationary spiral which reduced the purchasing power of families. A continuity that has not stopped pushing up housing prices so far in 2022 with a particular impact on new programs: while the price of second-hand houses increased by 3.7% in June, that of new increased by 6.4% to reach 2,641 euros. per square meter, according to the analysis presented this Thursday by Valuation company.

According to the expert, these increases are more due to the lack of available fleet (especially in certain markets such as Madrid and Barcelona), added to strong demand and an accelerating rate of absorption and, last but not least, rising construction costs due to the remaining tensions with certain raw materials and supplies. A deficit that launched the cost of construction at €1,111/m2 in June 2022, which represents an increase over one year of 7.7%.

For capitals, Barcelona (€4,765/m2) continues to register the highest average price of new homes at national level, followed by Madrid (€3,968/m2) and San Sebastian (€3,903/m2). On the contrary, Badajoz (€1,264/m2), Caceres (€1,247/m2) and royal city (€1,246/m) are the lowest average amount.

In any case, the company also points out in its analysis that new housing development levels are five times lower than 15 years ago when the brick crisis hit. “In turn, the great dynamism of demand would be determined by an advance in buying decisions in response to the next rate hikes and as an alternative to financial markets”, he stressed during the presentation of the report, the CEO of the Evaluation Society, Juan Fernández-Aceytuno. A series of factors, in addition to excess liquidity in the market, inflation and negative interest rates, continued to stimulate investor appetite.

All in all, the Appraisal Society has yet to find any warning signs of a new housing crisis. They ensure that they see no signs of mortgage overheating, “with a virtual absence of land financing and stable risk indicators”. But they also believe that the good evolution of the market could be altered by the current scenario of macroeconomic and geopolitical uncertainty.

rent increase

Despite the shopping “boom” that the sector is still experiencing, experts from the Appraisal Society point out that the rental market will continue to be the protagonist in the coming times “due to the cost necessary to acquire a home”. More specifically, they point out that wages remain the main limitation on the debt capacity of Spanish families. This eventually contributes to the fact that “in the face of rising inflation, rising interest rates and falling monthly residual income, leasing becomes more important, as is happening in the United States and Europe”.

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