The real estate sector of Spain following the COVID-19 shock!

The COVID-19 pandemic has major effects on economic growth, and the immobilization sector still feels the effects, albeit not as much as others. In particular, CaixaBank Research expects GDP to decline in 2020 by 13-15% and to return to pre-crisis levels by the end of 2023. However, considering the severity of the situation and great uncertainty as to how the pandemic will progress, it is necessary to remember that the sector is much stronger than in the 2008 crisis.  for sale in qatar

The financial condition for Spanish households and companies in the sector was usually better than it was 12 years ago before the outbreak of the coronavirus. In addition, in comparison to the demographic pattern, the number of new properties constructed was not excessive. Banks now have much improved liquidity and solvency ratios. All these factors make us optimistic about the capacity of the sector to cope with the current crisis.

However, the scope of the economic effects of COVID-19 would have a direct impact on the labor market and therefore housing demand. House sales decreased by 39.2% in April, with a decrease of between 30% and 40% in 2020 (with a gradual recovery in 2021). Home earnings are being eroded and uncertainty about potential job opportunities may lead to household precautionary savings being increased and long-term investment decisions being postponed. House sales to foreigners, who represented 12.5% of the total in 2019, will be particularly affected.

During the emergency, construction was directly affected but resumed relatively quickly, after constraints were lifted. Nevertheless, due to the unpredictable economy, a major slowdown in the start of new construction projects is highly probable. By 2020, new building permits could decrease by 20% to 40 percent.

In view of the decrease in demand, house prices will experience a major adjustment and may be 6 to 9 percent below their pre-crisis level throughout Spain by the end of 2021. However, there will be significant variations, whether geographical or form of housing, with all the evidence of the greatest decline in tourist areas and secondary properties.

The rental market would probably be less affected, as higher demand supports households' difficulties in purchasing a home. Actually, we dedicated the article «To buy or rent? This section's report on an overview of housing affordability for tenants deals with revenue but in particular with savings potential.

We should also remember that the current crisis causes change in many facets of our lives, many of them linked to our home habits (we've never spent so much time at home!). The pandemic could also drive certain reforms in areas such as home modernization that promote the transition to a more sustainable economy.

Since the height of the outbreak has ended, all our attention must be focused on recovery. The economic and social changes arising from this can be far-reaching and will transform the real estate market. We must be able to transform the obstacles into opportunities in this scenario.