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A key factor in the behaviour of the residential<br />
developer sector will be the availability of new<br />
bank financing. In principle, we expect to see<br />
severe restrictions on availability and also on the<br />
affordability of financing, with a rise in the cost<br />
of finance and clauses giving banks more leeway<br />
when allocating the loan amount among units<br />
sold. The restrictions on real estate financing<br />
could be accentuated by financial sector<br />
concentration resulting from bank mergers.<br />
Lastly, we have observed high demand for<br />
residential developments on the outskirts of<br />
cities, especially singlefamily homes, probably in<br />
reaction to the trials Spanish households have<br />
had to endure when confined to small housing<br />
units during lockdown.<br />
Housing transactions could decline by<br />
up to 25% in 2021 vs 2019<br />
PRICE TRENDS<br />
The prices of second-hand and new-build<br />
homes will behave very differently.<br />
The main reason for the difference in behaviour<br />
is the anticipated increase in pressure on some<br />
households and individuals when selling their<br />
homes, compared to developers. In the<br />
economic circumstances awaiting us over the<br />
next few months, homeowners with small<br />
businesses and those employed in the sectors<br />
most affected by the current crisis (mainly<br />
hospitality and tourism) will come under<br />
considerable financial strain. It seems<br />
reasonable to assume, therefore, that such<br />
owners will be under greater pressure to sell<br />
their homes quickly, which will push down<br />
selling prices.<br />
We have been monitoring the asking prices of<br />
second-hand homes in Spain that have been<br />
on the market since the second half of March,<br />
i.e. since the start of the pandemic, compared<br />
to the asking prices of similar homes before<br />
the pandemic. It turns out that prices dropped<br />
sharply, by between 5% and 15%, in almost<br />
all Spanish cities, especially in tourist areas.<br />
After the initial drop, there were no further<br />
price decreases until September, when the<br />
supply increased very significantly.<br />
In the rental market, on the other hand, which is<br />
much more elastic, prices have adjusted very<br />
quickly to the new market conditions.
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