Will Real Estate prices go down? (Part 1)

Spain faces the worst economic crisis in period of peace, although the real estate market seems not to be affected equaly. As our GDP plummets into double digits, the indexes that affect real estate are not showing disaster in the same way.

Since the alarm state began (between the first and third quarters of the year), the average price of finished homes (new and used) fell just 1.6% to 1,361 euros per square meter. Of course, this data represents a decrease of 0.4% comparing to the same period of the previous year and the first interannual fall in the price of housing in Spain in the last five years, so we could be facing a change in the trend.

Despite this slight contraction, the average price in Spain is still 13.7% higher than the minimum registered in the previous crisis and remains 33.6% below the maximum level reached during the property boom in 2007.

One of the reasons behind the fact that house prices have been practically frozen in recent months is that owners are reluctant to lower prices. Furthermore, future buyers (the demand) are also leisurely waiting for the price to decline. This explains the slowdown in operations and the kind of lethargy in which the sector is plunged.

The low volume of transactions distorts the numbers, which remain stable in the second quarter, "with a 0.1% rise, according to the INE, and a 0.8% drop according to real estate portals such as Idealista.

The prime areas of large cities could have greater price reductions, due to the change in work and living habits due to the pandemic, with teleworking and the search for open spaces and homes outside the city.

But despite the current reluctance, the owners will have no choice to lower the price, as some experts point out. Bankinter analysts are some of them, and they predict that prices will fall down than 9% between 2020 and 2021. The reasons are due to the fact that the virus will have "a greater impact on the Spanish economy and, specifically, on employment"; the economy contracts and that the unemployment rate rises, is the prelude to the fall in the prices of the apartments, which is always preceded by a fall in real estate operations.

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