(Bloomberg) — Spain’s $6 trillion home market looks headed toward another crash, according to economists who are studying the impact on property demand stemming from Europe’s strictest pandemic lockdown.
While it’s too early to estimate the full dimensions of the blow to demand caused by the health emergency that flared up in March, experts who study the Spanish market say the hit to housing prices in 2020 could range from 6.5% to 15%.
“We’re in the prologue of a decline that will only become apparent in September,” said Gonzalo Bernardos, an economics professor who directs the real estate Master’s program at Barcelona University. “By year-end, prices will have dropped by 12%, because this is maybe the sharpest economic crisis we’ve had.”
The looming crash comes after the Spanish market rose 32 percent since the trough of the previous collapse was reached at the start of 2014. House-price declines are felt sharply in a country where home ownership approaches 80% and savers tend to use property as their primary nest-egg.
Big Declines
Other observers who predict declines of more than 10% this year include Raymond Torres, at the Funcas think tank in Madrid, and Alejandro Inurrieta, a property consultant and former economist at Spain’s Economy Ministry. Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados, predicts a 6.5% drop.
The consultants say no factor is as important to house prices as job growth and the economic outlook. According to the Bank of Spain, GDP could shrink by as much as 15% this year in a worst-case scenario while the jobless rate — already at 14% before the pandemic — could jump to between 18.1% to 23.6%.
The data does point to a correlation between levels of Covid-19 infection and declines in asking prices for homes.
Navarra and Castilla y Leon, two of the regions with the highest infection rates, showed some of the biggest declines in asking prices in May, versus a year earlier, according to data compiled by Bloomberg from the Health Ministry, the INE statistics agency and Idealista.com, the largest property sales website.
By contrast the regions with the fewest cases per 100,000 population — Andalucia, the Balearic Islands and Murcia — saw home prices climb 3.8% to 6%.
Still, there are some indications that a housing market collapse won’t be as severe as in the previous crisis. Prices for second-hand homes in Spain will fall 6% to 7% this year but bounce back much faster, said Miriam Goicoechea, head of residential and alternative research at CBRE in Spain.
“We don’t have an excess of supply that needs selling and neither do we have the levels of indebtedness that we saw in the 2008 crisis,” Goicoechea said. “Those two factors will mean we’ll have a much faster recovery.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
