Inflation at +6.7% in December 2021!
Consequences for real estate
The National Institute of Statistics (INE) has published the anticipated data for the Consumer Price Index (CPI) for December 2021. Inflation reached its highest level in almost 30 years in October, with a year-on-year increase of 6.7%. This is 1.2% higher than the rate recorded in November. This is the eleventh consecutive monthly increase. Electricity and food prices have driven up prices over the past month.
The impact of this record inflation on the property sector is significant in the short and medium term.
Firstly, in the immediate rental sector. The revision of leases signed in January or February "suffers" from this 6.7% increase in inflation. A simple example: you rent a flat in Barcelona for 1500 euros per month. The annual revision of the rental value based on December's inflation will automatically increase your rent by 100 euros per month, from 1500 to 1600 euros per month!
In new-build property, with the rise in the price of raw materials which will lead to an increase in selling prices in the short to medium term.
The higher cost of living will reduce the ability of Spaniards to save, as well as their financing capacity. Potential buyers will therefore be pushed out of the purchase market, both in the old and the new. Conversely, those with cash will have an interest in investing quickly in real estate so that the value of their assets does not decrease.
With Euribor at historic lows, it seems unlikely that the European Central Bank will raise rates this year. This is due to the very high level of debt in European countries. Despite this, a scenario of a rate hike to 1% or 2% cannot be completely ruled out. This would have a direct impact on the monthly repayment of loans. With a doubling of the rates currently granted by the banks!
However, the big question is whether the inflationary period is transitory or sustainable. Indeed, wage demands are on the rise. And if the rise in interest rates is passed on to wages, we would be entering an inflationary spiral with disastrous economic consequences.
October 2021, 14% rise in transactions and 8% rise in prices
The sale and purchase of houses and the signing of mortgages continue to grow in 2021. According to the information provided by the notaries, 56,958 real estate transactions were formalised in October 2021. This is 14.4% more than last year and the highest figure for a tenth month of the year since 2007. Since the beginning of the year, more than 527,000 homes have been sold throughout Spain. This is more than the number of annual transactions between 2009 and 2016. And almost the same number as in the whole of 2017. The average price of residential property in October rose by 7.9% year-on-year to 1,485 euros per square metre.
2021 property market driven by residential property
The largest property investments in 2021 were in residential property. In particular in rental housing and collective housing for the elderly. The residential sector dominated the property market in 2021, with an investment of €2.8 billion in the last 12 months, followed by the industry and logistics sector with €2.5 billion.
Market forecasts for 2022
The real estate sector's forecast for 2022 is positive. With the number of residential real estate transactions exceeding half a million. Provided that demand remains stable and households use the savings accumulated during the Covid period. There are, however, risks not related to real estate that can affect the market's development. These include new, more aggressive Covid variants. And the cost of living with the very rapid increase in inflation in recent months. A third factor that could challenge the market development is the way the construction sector could be affected by the slowdown and delays in the distribution of raw materials needed for housing construction.
New house prices to rise by 10% in 2022
Prices are expected to rise by 10% in new housing. There are three main reasons for this. Firstly, an insufficient supply due to the delay in ongoing building sites or to legal limitations (imposition of 30% social housing in new programmes in Barcelona, for example). A 15% increase in demand for new housing, which is attracting more and more young households in search of a more suitable and more functional home. And construction costs that have risen by 8% due to the increase in raw material prices.
Buying in Spain: Germans have supplanted the British
With the Brexit, it is now the Germans (10.4% of purchases) who are ahead of the British (9.9% of purchases) in property purchases in Spain. Behind them come the French (7.8%), the Moroccans (6.5%, almost all resident in Spain), the Belgians (5.6%, up sharply) and the Romanians (5.3%, almost all resident in Spain). In terms of destinations, for non-resident foreigners, the Balearic Islands (34%) and the Canary Islands (24%) are first. Then the Valencian Community (20%), the Murcia region (17%), Andalusia and Catalonia (11% each).
Choosing a second home: location and space
In Europe, 89% of homeowners (94% of future homeowners) consider that location is the most influential factor when buying a second home. Non-urban environments are preferred by 77% of them (85% of future owners). In addition, 72% of owners (84% of future owners) believe that it is important that the second home has a garden or outdoor space. The number of rooms is a decisive factor for 57% of them, while 46% are particularly interested in the presence of a large living space. 41% of current homeowners say they also use their second home for teleworking; 64% of future homeowners would like to use it for teleworking.
156 billion in bad assets sold
Spanish banks have offloaded €155.9 billion of bad or doubtful loans since 2015, but still have a stock of €80.2 billion and an NPL ratio of 4.5%, which places Spain third among European countries with the most bad loans, after France and Italy. The banks that sold the most of these assets were Santander (€39bn), CaixaBank (€24.8bn) and Banco Sabadell (€24.6bn). The largest buyers were Blackstone (€32.4bn), Cerberus (€26.8bn) and Lone Star Funds (€17bn)
Bank of Spain: risks, pandemic, inflation and European funds
The Bank of Spain sees several risks that could hinder the economic recovery. Firstly, the possibility of a worsening of the pandemic, which could require the reintroduction of more stringent containment measures. It also sees a risk in a prolonged period of global supply disruptions and high prices for energy, raw materials and other intermediate products, and their corollaries of higher end-product costs and higher labour costs. Other elements of uncertainty are associated with the absorption capacity of the resources of the European Recovery Plan, as well as the purpose that consumers will give to their accumulated savings, the recovery of foreign tourism or the possible damage to the business fabric.
The new brackets of the IRPF 2022 for 2021 income
For your information, here are the new income tax brackets in Spain:
Up to 12,450 euros 19%.
From 12,450 euros to 20,200 euros 24
From 20,200 euros to 35,200 euros 30
From 35,200 euros to 60,000 euros 37
From 60,000 euros to 300,000 euros 45
More than 300,000 euros 47%.
NEWS IN JANUARY 2022 IN EUROPE AND THE WORLD
Residential property prices have risen by 10.4% in the UK in 2021, the highest increase since 2006.
The Economist ranked Tel Aviv, Paris, Singapore and Zurich as the 4 most expensive cities in the world to live in.
There has been a decline in rental values for retail space, with many bankruptcies and shop closures weighing on demand, particularly in Germany, the Netherlands and the UK.
In contrast, there is upward pressure on rental values in logistics, due to the rise of e-commerce.
In France, and soon everywhere in Europe, it is very difficult if not impossible to borrow for more than 25 years or with a debt ratio of more than 35%.
The European Union wants to reduce the taxation of all products that contribute to Europe's green and digital transformation, in particular solar panels.
The European Commission wants to ban the rental and sale of energy-intensive housing.
The new trend: investing in land and virtual real estate in the ... Metaverse!
The 3-month Euribor on 1 January 2022 is at -0.572, an all-time low at the beginning of the month.
NEWS IN JANUARY 2022 IN SPAIN
The number of residential property transactions is expected to reach 640,000 units in 2021, a number not reached since 2007.
Malaga, Seville and Valencia are the cities where property prices have increased the most in 2021.
200,000 inheritances and 25,000 donations were registered in 2021, two record figures.
Rental prices are expected to rise by 5% in 2022.
Caixabank expects residential property prices to rise by 4% in 2022.
According to the INE, house prices rose by 4.2% in the third quarter of 2021.
If young Spaniards became independent at the same age as other Europeans, there would be a shortage of 2 million homes in Spain!
Madrid, Malaga and Valencia are the three cities with the highest number of new home purchases. Barcelona is only in 13th position.
Madrid was named "Best MICE Destination in Europe" (Meetings, Incentives, Conventions and Exhibitions) in the World Mice Awards.
According to the IMF, the future rent cap envisaged by the Spanish Government in the forthcoming Housing Law ("Ley de Vivienda") could reduce rental supply.
The new Land Law ("Ley de Impulso para la Sostenibilidad del Territorio de Andalucía - LISTA") of Andalusia came into force on 23 December 2021.
The developer Sierra Blanca plans to invest 500 million euros by 2025 on the Costa del Sol.
Aliseda is offering 1,300 plots of land for sale, which can be purchased with only a 10% down payment and the rest until 2023.
The development of Nuevo Norte, the new district of Madrid, will cost the public authorities 1.8 billion, but will bring in 5.9 billion in tax revenue.
The Spanish government has decided to extend until 31 March the reduction in taxation on electricity from 21% to 10% (VAT) for households.
The Lidl supermarket network is closing 2021 with 39 new shops after investing more than 220 million euros
Amazon will open its first cashless supermarket in Spain before 2024.
The Bank of Spain has lowered its GDP growth forecast to 4.5% in 2021 and 5.4% in 2022.
acheterenespagne.fr- 2022 - The Real Estate News in January 2022
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