Funcas expects housing to rise 6% in 2022, but rules out a new bubble
William GinesFOLLOW, CONTINUEMadrid Updated:07/03/2022 14:02h
Housing prices will not let up this year either, but experts insist that there is no real estate bubble. This Monday Funcas has published a report in which it ensures that the "favorable evolution in recent months will continue in 2022, with price increases that may
reach 6% despite the complicated international context». An evolution that, however, does not entail danger for the foundation.
Funcas believes that the price increases experienced in housing, which has been one of the sectors most strengthened by the pandemic, is the result of "background trends" in supply and demand. There is no market "disconnected" from the financial possibilities of buyers for Funcas, despite the fact that the institution recognizes that the behavior of the sector is "atypical" in a context marked by inflation and uncertainty.
Thus, demand is growing strongly due to the 75,000 million savings generated by Spanish households after the outbreak of the pandemic. An amount supported by mechanisms such as ERTEs. In addition, the excess liquidity of the market means that mortgages have had very favorable conditions and investors are interested in the real estate sector instead of other less profitable assets.
On the other hand, supply has fallen due to the paralysis of construction during the confinement and due to bottlenecks in the supply chain. "This situation of overdemand should last in the coming months, prolonging the upward trend that came from the pre-Covid growth stage and the symptoms of acceleration in segments such as new housing," adds Funcas. The average price of construction materials in November was 19% higher than the same month in 2019, according to the INE.
According to the foundation, the financial effort of families to
buying a home is at levels close to 30%, less than in 2019 and "significantly" below the figures for the period prior to 2008. "Finally, there are no signs of a relaxation of credit standards: neither for the value nor for the average duration of mortgages and for the Granting of a minority of loans to people with temporary contracts. In short, the Spanish market is not facing a problem of financial sustainability at the moment”, concludes the organization, which does warn of the delicate situation that other countries are experiencing.
The United States, the United Kingdom and Germany, for example, show worrying signs. And in the Netherlands there is a high incidence of loans granted for a value greater than 80% of the appraisal price and double-digit price increases. A situation that has caused some central banks to begin to tighten financing.
Spain the situation is different. According to Funcas, the average value of mortgages is close to pre-pandemic levels, but it is still 36% lower than the maximum reached just before the 2007 bubble. 3% of loans are granted to less than 30 years, by 70% of 2007; and a "tiny minority" of credits are granted to people with temporary employment contracts.
Funcas believes that if the ECB raises interest rates, this could tighten mortgage lending and deflate housing sales figures, which, together with the upturn in supply, would allow house prices to fall.