A safe haven: As inflation rises and interest rates in Spain stay low, investors turn to new build property

HIGH inflation and low interest rates are pushing investors towards the real estate sector, which is once again becoming a safe haven asset.

This is the main conclusion of a new study carried out by EAE Business School, which shows that the real estate sector is recovering rapidly and has already reached pre-pandemic levels.

This news was confirmed by the fact that the granting of mortgage loans continued to increase during the first half of 2021, with an increase in operations of more than 13% compared to the same period of pre-pandemic 2019, although the average amount loaned on each mortgage fell.

The Finance Bureau has certainly noticed this effect, with us experiencing an increased level of interest in property loans from both investors and private individuals throughout the year. 

The report, prepared by EAE Business School professor Juan Carlos Higueras, shows that the new house market has benefited the most from the surge in sales post-pandemic, with the price gap between new and second-hand properties widening.

During the third and fourth quarters of 2020, after the end of the state of alarm, “a significant price gap” arose between new and second-hand housing, with growth levels of 7.5% (2020 Q3) and 8.2% (2020 Q4) compared to used housing, which showed increases of just 0.8% and 0.4%, respectively.

“This data shows that the price of new housing has recovered and exceeded historical levels,” Higueras said.

New home sales have increased at a faster rate than used homes, rising by more than 40% in the first quarter of 2021 in year-on-year terms. “This situation shows that the housing market is growing solidly despite the pandemic and the sharp downturn in the Spanish economy, possibly due to improved confidence and expectations in the economy,” explained Higueras.

Home sales and purchases have been growing at a good pace, reaching pre-pandemic levels in March 2021.

With data from June 2021, the study concludes that the number of property sales and purchases has increased by 82.5% compared to the same month of June.

Four regions accounted for 64.3% of the total number of sales between January and July 2021. Andalucia was first with 76,422 homes sold (20%), followed by Catalonia with 60,807 homes (15.9%), Valencia with 55,488 units (14.5%) and Madrid with 53,480 transactions (14.0%).

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