Urges to review the management procedures for developable land so that the production of housing can respond to the needs

MADRID, 13 Jun. (EUROPA PRESS) -

The Bank of Spain considers that, despite the increase in the cost of credit, the price of housing will continue to show a greater downward resistance than the quantity variables of the residential market (such as sales or visas), due to the scarcity of new construction , the high costs of construction materials and the favorable financial situation of the different agents in this market.

This is clear from the report 'The mismatch between housing supply and demand, and its relationship with prices', published this Tuesday by the Bank of Spain, which warns that the current inflationary episode and the consequent tightening of Monetary policy and, therefore, financing conditions are negatively affecting the dynamism of the housing market.

According to the agency, the median impact, both on quantity variables (new construction and sales permits) and on prices, of a 100 basis point (bp) increase in the mortgage rate -- a magnitude similar to the increase observed between the final of 2021 and the end of 2022-- is negative and statistically significant.

For example, after eight quarters, the median impact on new construction permits and home sales would be, respectively, almost 11% and slightly more than 3%, respectively. On the other hand, it is of a lower magnitude in the case of prices (somewhat less than 2% after two years).

Looking ahead to the coming years, the Bank of Spain warns that the evolution of the relationship between supply and demand for housing will be subject, especially, to the behavior of net migratory flows. If the projections of the National Institute of Statistics (INE), which contemplate a significant increase in the number of households until 2024, are fulfilled, a prolongation of the tension in some local markets can be expected. That volume of finished houses would be insufficient for the expected formation of households.

From the point of view of economic policy, given the aforementioned mismatch between housing supply and demand, it is advisable to review the management procedures for developable land so that housing production can respond more quickly to existing needs. .

According to the report, the demand for home ownership has recovered after the impact of the pandemic, with greater intensity than the supply, which is more rigid in the short term, which has resulted in a certain imbalance between the two and in upward pressures. about prices.

The economic disturbances suffered in the last three years have strongly affected several of the determinants of housing supply and demand. On a regional scale, in recent years, in general, a lesser sufficiency of supply to meet demand has also been observed. The prices of home ownership have risen more in those regions that have shown a greater relative scarcity of their offer.

The supply of new housing continues to be relatively low, conditioned, moreover, by the sharp rise in construction materials and availability problems, and the growing shortage of labour. In turn, the relative scarcity of the supply of new construction has caused a certain shift in demand towards the second-hand modality, which has exerted pressure on their prices.

For its part, the supply of used homes was boosted during the pandemic by the increase in inherited housing market entries, although the quantitative importance of this element is notably less than that of the determinants described on the housing supply new. In addition, said evolution has been offset by the recovery of tourism --domestic and foreign--, which has meant that, in some local markets, a part of the housing supply has been used for vacation purposes.

Specifically, since the summer of 2021 there has been an acceleration in the weight gain of tourist housing in the total housing stock.

As a consequence of this evolution of supply and demand, a certain imbalance between the two has been observed after the pandemic, which tends to be more pronounced in the most populated geographical areas. In fact, in 2022 the largest increase, in nominal terms, in house prices since 2007 and the least sufficiency of supply to meet demand was recorded.

According to the Bank of Spain, the recovery in demand fell, initially, on the national component of demand and, later, abroad. In 2022, foreign sales exceeded their 2019 figure by 40%.

On their side, national buyers tended to be, according to their socioeconomic characteristics, high-income households, middle age (between 30 and 49 years) and higher levels of studies.