The positive consequences that the coronavirus crisis will have on the housing market in Spain

During the current coronavirus crisis in Spain, it's always good to try and look for the positives. The housing market doing exacty this and is trying to get a more positive reading on the health crisis and the economic blow expected from the COVID-19 outbreak. Despite the fact that sales operations have been paralysed and experts assume that the housing market will not recover normal activity at least until the end of the year, the sector remains optimistic and is confident that the pandemic will bring some positive changes.

This is the point of view of Comprarcasa, a network of 150 real estate agencies in Spain and Portugal which has sealed more than 120,000 transactions in its two decades of activity. The company has summarised the 'good habits' that could be here to stay in the real estate market after the crisis in a recent study. Among them is the explosion onto the market of technological tools, the empowerment of the buyer, low interest rates and the growing professionalism of the sector. 

Let's have a look at these potential good habits that could come out of the crisis:

Price drop and buyer's empowerment

The network considers it inevitable that we will see a drop in the price of houses, in line with the theory held by Century 21. This crisis will force many to lower the price of their homes to adapt them to the new circumstances, especially if they want to close the deal as quickly as possible. 

The market is already considering a drop of between 10% and 15% in prices, although everything will depend on the depth and duration of this crisis, but what is clear is that "we face months in which buyers will once again have their say".

Interest rates will remain low

Another piece of good news is that, in order to face the crisis, central banks around the world will maintain accommodative financial conditions as long as there is no pressure from inflation. Therefore, interest rates in the eurozone could remain at the current historic lows of 0.0% beyond 2022. As a consequence, interest rates on loans to families and businesses will remain low and the 12-month Euribor, the reference indicator for most mortgages in Spain, will not rise sharply.

"This cheapening of mortgages and the fall in the financial markets lead us to think that the sector will continue to be one of the most interesting assets for investors, and that the impact on the medium and high segment of the real estate market will not last long," add experts from Comprarcasa.

An investment refuge in times of uncertainty

The study reminds us that, as has happened in the past, once the most critical moments are over, the recovery of this sector is always very intense, even greater than expected. Furthermore, the experts add that the volatility that is hitting the financial markets, added to the forecast of an extended era of ultra-low interest rates, lead them to believe "that the real estate sector will continue to be an interesting destination for investment". 

Explosion of technological tools 

This period of confinement will also be a boost for the sector to increase its commitment to technology and new digital tools. "Many real estate professionals are taking advantage of this hiatus to train staff, update their tools, and strengthen their relationships with customers thanks to technology," the study adds. For example, both virtual tours of homes and the formalisation of contracts or payment of deposits digitally are on the rise. 

Many holiday rental homes will change their use

There will also be a shift from the holiday rental market to the traditional market in the face of the expected setback in the tourism sector, which would increase the supply of long-term rental apartments available on the market. This increase will be accompanied by "a natural downward adjustment in prices", the network stresses.

Professional rental management will continue to grow

Comprarcasa believes that the package of measures approved by the government to help rental tenants, which distinguishes between large and small owners, "will undoubtedly be of great help to vulnerable tenants. In addition, large scale holders (those in possession of a large number of properties) have also provided their own contingency plans for the most vulnerable tenants in these difficult times. "This fact leads us to believe that professional asset management allows for a more efficient response than that of private owners, and that this trend will be further consolidated after this crisis," the study insists.

Only the best will survive

As is the case in other sectors of activity, the best prepared companies are those that will best recover from the economic blow, while the weakest are in danger of disappearing. "The technology available to real estate agents, continuous training, network operations, complementary services, financial tools and the strength of their brand will make the difference between surviving or not," the study says.

Delay in renting measures criticised by the sector

The spread of the epidemic so far has left in the air one of the government's star measures: controlling rent prices. Despite the fact that the Ministry of Transport, Mobility and Urban Agenda (Mitma, formerly known as Fomento) had planned to present the rental price index in the first quarter of 2020, the measure has been postponed. Also delayed is the goal of the minister José Luis Ábalos to bring to Congress an "initiative to allow control of rental prices in those areas that have experienced exorbitant increases".

Both measures have drawn criticism from both the opposition and the real estate market. In fact, national and international organisations, economic experts and the sector have long warned that establishing a control of rental prices can be a counterproductive measure for the rental housing market itself.

The need to rethink architecture and urban planning

Finally, the study emphasises that "it is very likely that the traces left by these weeks of confinement, with the phenomenon of 'the balconies' and the coexistence of neighbours, will cause a deep reflection on the houses to be built in the very near future.