Trends in the real-estate market during the fourth quarter of 2022

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The economic outlook at the end of 2022 is less optimistic, with the ECB raising interest rates in an attempt to halt the rise in prices (CPI), which are still high and are now being pushed up by the rise in the underlying rate, which is more closely correlated with private household consumption.

Interest rates will continue to rise, as indicated by futures and the ECB itself, which will undoubtedly affect both supply and demand.

With regard to the real-estate sector, new residential construction will maintain its pace, given that many of the projects are already committed and sold, whereas second hand real estate, and especially second homes, may be more affected, creating the effect of people switching from buying to renting.

The most active segments are likely to be real-estate in prime locations and the last mile of rapid delivery. Alternatives such as retirement homes, student residences, co-living, etc., will also keep investors interested with new acquisitions and developments. Here, if financing becomes difficult to obtain and they do not need it initially, they will change their debt structures to use equity at first and then, as interest rates evolve, switch this to gradual leveraging.

EURIBOR (European Interbank Offered Rate) is the main reference used by financial institutions when granting their mortgage loans, mostly for the purchase of homes by individuals and for developers in the property construction and marketing phases. This financial product is the interest rate at which banks lend money to each other, according to their needs, and this changes every day in regulated markets. Each day the arithmetic mean of the daily market quotes is obtained, which in the middle of the morning is set in what is known as the fixing (the extremes are removed and this mean is calculated using the 70% of prices remaining after removing these extremes (15% highest and lowest)). This then forms the basis for applying the base rate for mortgages.

There are several Euribor time periods, but the most widely used for mortgage loans is the 12-month Euribor. The monthly evolution of the EURIBOR in the interbank market has been as follows:

Within the real-estate sector, equity release is starting to be seen in Spain and offers an alternative investment option for individuals and institutions. Through this, people who have reached retirement age can choose to receive an annuity and stay in their property for the rest of their lives. In this way, they turn their real-estate assets into liquid assets and can remain in them.

In the following chart, the research department at the Gloval Group has summarised the recent evolution of the average monthly pension in Spain, choosing the category representing the most people, namely retirement pensions. In the last 15 years this has experienced a compound annual growth rate of 2.94%, with the average monthly amount in this case being €1,246 in January 2022.

GLOVAL Analytics was created in 2019 as a new division within the Gloval Group. It is a key commitment for the group, aware that without harnessing the potential of big data and Artificial Intelligence (AI) it is impossible to have a leading
presence in today’s real-estate market.

You may also see our previous GTrends Reports and our latest GIX Report, where we analyse the main real-estate economic indicators in Spain.

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