Many banks have started to lower their mortgage offering in the first weeks of the year, anticipating the future interest rate cuts that the European Central Bank (ECB) will undertake in the coming months. And this twist in the mortgage war seems to have only just begun.
According to Juan-Galo Macià, president of Engel & Völkers for Spain, Portugal and Andorra, during the presentation of a report on the real estate market, "a spectacular mortgage war is breaking out that will no doubt speed up the market".
His opinion is in line with that of Gonzalo Bernardos, economist, consultant and director of the Master's in Real Estate at the University of Barcelona, who believes that banks are going to improve loan conditions in the coming months to boost the granting of new mortgages after defaults remained stable even after the highest, fastest rise in interest rates in the Eurozone's history.
According to Bernardos, "they will have to increase their credit base and now have a degree of confidence that they didn't have last year. They will lift the handbrake, and there will be a mortgage war." Their forecasts point to entities increasingly lowering the interest rate on their fixed mortgages and that at the end of the year, the offers may return "to 2%, even 1.8% for clients who have good profiles."
Currently, there are several fixed-rate mortgages below 3% for a 30-year term, such as those offered by BBVA, Evo Banco, Banco Sabadell or Ibercaja. Although the list will grow as the months go by and as the price of money becomes cheaper.
Bernardos also expects banks to be more inclined to grant mortgages above 80% as long as consumers can pay. "In the coming months, we could offer mortgages at 85%, 90% or 95%. Although they will be selective, they will help many families access housing."
Increase in sales and housing prices
There is hope that the mortgage financing tap will be turned on in the coming months, and this is seen as a revulsive for housing transactions, which could recover the upward trend.
The economist estimates that sales will grow at a double-digit rate this year (close to 15%), reaching around 650,000-660,000 sales, compared to 640,000 in 2023, with the used housing market as the largest protagonist.
“Spring 2024 will mark a turning point as the economy recovers, interest rates lower, and the financial sector is more flexible in granting credit. Financing will be the key for used home sales to set a new record, exceeding the figures for 2022,” Bernardos detailed.
Regarding housing prices, the Economics professor estimates that there could be an increase of between 5% and 7%. As has been happening in recent years, the increase in the cost of residential properties will be more evident in large cities and their metropolitan areas, focusing on Madrid and the Mediterranean coast. "Where there is more supply, housing will rise less, nd where there is less supply, it will rise more," Bernardos stressed.
The German real estate company specialising in the luxury segment also points to this trend. "Despite the drop in transactions, housing prices have remained on the rise in the most in-demand areas of Spain due to the good tone of the labour market, the lack of supply and increased rent prices," highlights the study.
Engel & Völkers also predicts a strong improvement in transactions worth more than €1m. "In 2024, the purchase of homes worth more than €1m will grow by 40% in Spain, led by Malaga, Mallorca, Madrid, Barcelona and Costa Blanca within a 'real estate boom' with increases in prices and transactions," the company pointed out.
Currently, the real estate agency's portfolio shows that 55% of the properties for sale exceed this barrier in the capital, while in Barcelona, this percentage is close to 40%, it is already 15% in Valencia, and in Seville, it rises to 25%.
Criticism against the rent cap
During the presentation of the report, Gonzalo Bernardos also spoke about the situation of the rental market. And he has stated that "in many parts of the country, it is in free rise" as a consequence of the high demand and an increasingly scarce supply, a consequence - in his opinion - of the fact that "the Government has generated panic among the owners" due to the permissiveness with squatting or rent caps that are already underway in Catalonia.
In this scenario, the Economics professor warned that large owners are likely to invest in other places and that Barcelona will lose interest in favour of markets like Madrid, Valencia or Zaragoza. He also warned of an increase in the number of homes moving from the traditional rental market to the seasonal market and funds that will decide to sell homes destined for renting if the books don't add up.
Bernardos has been especially critical of the rent cap, which he has described as "a total deception" since it will not help families with fewer resources but rather "benefit the progressive posh." The rent cap "has been applied in many parts of the world and has never been successful," he concluded.