The housing market is beginning to recover its tone after the coronavirus hit. According to the latest data from notaries, in August sales of homes signed their first year-on-year increase so far this year, while the formalisation of new mortgages experienced its best figure of the year. In both cases they grew by more than 6% compared to the eighth month of 2019.
And a study by the Instituto de Valoraciones is optimistic about the coming months. “Although the future of the property market depends, to a large extent, on how the health crisis and the economic situation evolve, the figures for activity in the sector over the last few months reflect a positive outlook for its reactivation,” say the firm’s experts, who add that “many of the people who had stopped buying a property because of the state of alarm have now resumed their activity, and this group of interested parties is also joined by those who are looking for a replacement home that responds to their new demands and needs or those who, taking advantage of the attractive financing conditions, have become interested in buying a home to replace renting or buying a second home”.
In fact, the study summarises several factors that could boost the housing market this autumn, among which the return of the search for a replacement home, the favourable financing conditions, the attractiveness of Spain for foreigners who want a second home and the technological solutions that facilitate the operations stand out. We summarise what each of these potential drivers of residential activity consists of:
1. Search for replacement homes.
Following the changes in lifestyle and habits caused by the coronavirus pandemic, many families are now looking for a property to replace their current home that is more suitable to their needs, such as larger or more outdoor spaces and more light.
And, according to the Instituto de Valoraciones, this return to the search for replacement housing “is also influenced by the new conception of housing that we have today, which is no longer a place to sleep but a place where one spends a lot of time teleworking, training… Above all, taking into account the uncertainty about the duration of the current situation and the measures and restrictions that it may entail”.
2. Low interest rates.
Another major driving force in the housing market is that financing conditions remain favourable. The 12-month Euribor ended September at record lows, while banks continue to offer a wide range of both variable and fixed-rate loans, “which presents a good opportunity for all those interested in taking out a mortgage to buy a home,” the report adds.
The financial sector is still interested in increasing the number of operations and improving its margins, and to achieve this in many cases the entities are eliminating commissions, lowering the interest rates on mortgages and making the conditions of the contract more flexible. This scenario may also boost housing investment operations, whose profitability is around 8%, according to data from Idealista.
3. The climate factor.
Another factor highlighted in the report is the attractiveness of Spain as a destination for foreigners to buy a second home. “Good weather conditions, long coasts and natural and rural enclaves are a key factor in the revival of the property sector. The areas with the greatest coastal and natural potential are points of great interest both for investment in second homes and for foreign investment”, stresses the Valuation Institute.
However, the return to the market of this type of buyer will depend on how the global health situation evolves and the restrictions that may exist for travelling between countries. In fact, some studies estimate that home purchases by foreigners will plummet by more than 50% this year.
4. A health tourism destination.
The study also highlights that, following the arrival of covid-19, care of physical and mental health and general well-being has become more important. For this reason, it believes that “this type of tourism opens up a possible avenue for the growth of the real estate sector, taking into account that it could promote the purchase of second homes in natural and rural environments, or the renting of flats in strategic areas in order to enjoy this tourism that offers good options for the whole year”.
5. The growing technological solutions.
Finally, Instituto de Valoraciones points out that the different solutions available on the market (for example, to visit a property, to make a reservation or to sign a rental contract) can boost transactions.