Of the 25 countries in the study, Spain is the second furthest from this predicament, behind South Africa. The US, Canada and the Netherlands all have housing markets that are out of sync. The US banking supervisor has an “exuberance indicator” that determines when price developments are out of line with other economic parameters. As early as mid-2021, a Bloomberg analysis concluded that “real estate prices around the world are flashing the kind of bubble warnings that haven’t been seen since the run-up to the 2008 financial crisis.” Later in the year, supervisory bodies such as the ECB and the Federal Reserve warned of “exuberance” and “vulnerabilities” in housing markets. However, the international outlook is bleak. And in her opinion, right now there are plenty of reasons for the price hike, such as the tendency among homeowners to move due to lifestyle changes triggered by the pandemic, a trend “that is happening all over the world and must be one of the reasons why prices have shot up in some countries,” she says. But Taltavull all but rules out the possibility of a bubble: from her perspective, this could only apply in a situation in which rises are not linked to explanatory factors. This has sparked market tensions in areas such as regional capitals and centers of strong economic activity, she notes. “Construction has been minimal since 2008,” she says. Paloma Taltavull, who teaches applied economics at Alicante University, also points to a shortage of supply. The question is whether this rise is merely due to market paralysis in the early days of the coronavirus pandemic. Since last summer, both home sales and mortgages have reached levels not seen in more than a decade. “A low housing starts figure raises prices and many buyers resort to the resale home sector, which can generate unjustified price increases there,” he says. In Bernardos’ opinion, the current number is inadequate. There were around 100,000 housing starts in 2021, similar to pre-pandemic figures but far from the excesses at the beginning of the century the year 2006 saw the number of new units soar to more than 750,000. At the root of what could lead to a bubble is, he says, the imbalance between the supply of new houses and growing demand, but he stresses that a bubble of whatever dimensions would not, in any case, happen until 2024. However, he sees the risk of no more than a “light bubble” and makes it clear that the situation is very different from the 2008 global downturn: “If there is no financial crisis and the banks are not in big trouble, there would only be a market freeze and prices would fall,” he says. “There are some worrying symptoms,” says Gonzalo Bernardos, director of the Master’s degree in Real Estate Consultancy, Management and Development at Barcelona University. Meanwhile, CaixaBank’s research service, which quantified the average rise in 2021 at 1.9% (well below other sources), believes that the rate will double and reach 4% in 2022. The National Statistics Institute (INE) will not publish the official data until March, but the annual growth rate up to the third quarter stood at 4.2%, showing a clear upward trend. Housing has become more expensive in Spain in 2021, contrary to what many experts were predicting a year ago. “If they go up 9% as in Germany, or 20% as in the US, it leads to a bubble.” “The problem is when houses go up in price,” he adds. Right now, with that percentage lying between 30% and 32%, it’s a different scenario. “Anything above 35% means we have a stressed market, and Spain was at 46% in 2006,” he explains in reference to the peak of Spain’s previous housing bubble. In a bid to assess the risk of a bubble, he suggests analyzing the so-called effort rate: the portion of income a household allocates to housing payments. Lanzarote, home to Spain’s stretch of coast with the highest number of illegal hotelsĪccording to Ignacio de la Torre, chief economist at the asset management firm Arcano Partners, the current situation is linked to affordability.
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