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Housing prices are resisting the COVID-19 crisis: what are the reasons why?

resiste el precio de la vivienda en la crisis covid 19 cuales son los motivos 1 - Housing prices are resisting the COVID-19 crisis: what are the reasons why?

The deep crisis triggered by the coronavirus pandemic makes forecasting the future of the real estate sector complicated. However, the least optimistic forecasts are not coming true. Housing prices have not varied much from the upward trend observed prior to the COVID-19 crisis, although they have levelled off a bit.

The latest report from the Sociedad de Tasación clearly reflects this situation. According to the report, in the first quarter of 2020, mean home prices rose 1.1% with respect to December of the previous year. At the end of June, the mean price of new and resale homes was €1,681/m2, 2.7% more than in the same month in 2019.

What is the explanation behind this stability in home prices in the COVID-19 crisis?

Before the pandemic, the real estate sector was on an upward trajectory. But this recovery following the deep crisis of 2008 had started to level off. This trend has continued, though with some nuances, in recent months.

The increase in home prices has been lower, but the figures have been far from negative. There may be several explanations. The most common is that the real estate market has again come to be seen as a safe-haven asset that is more secure than other types of investments.

In times of uncertainty, like now, real estate becomes more attractive among those who prefer to avoid risk. There is one piece of evidence that confirms this: the decrease in the number of mortgages signed despite the number of real estate transactions. Properties are being acquired, but without taking out loans.

But this isn’t the only reason why home prices have stayed steady during the COVID-19 crisis. On the one hand, there is the health of the new home market, which had developments in process before the start of the crisis.

On the other, there has been a change in trends in one sector of the population: those around 30 years of age. This age group, which had been hesitant to purchase a home, is now starting to consider it.

Finally, you have to take into account the bump from older people who are searching for a replacement home, that’s to say one that is more suitable to their new needs. Two factors influence this issue: the change in trends in regard to the type of home caused by the lockdown (homes with a terrace or garden and far from urban centres are in demand) and the fact that those buying are a segment of the population that is more financially settled and with fewer problems in buying a home.

Unequal variations

Despite this slight upward trend in prices, it's true that the change according to autonomous community is uneven. Madrid is the autonomous community where the interannual variation to June has been highest (4.3%), followed by the Canary Islands (2.9%) and the Balearic Islands (2.7%). Meanwhile, Barcelona and Madrid continue to lead the ranking of the most expensive cities.

If you’re looking for more detailed information, Spainhouses has a price statistics section. In it, you can find real estate market trends and the evolution of home prices explained in a simple, visual way.

And of course, with the Spainhouses search engine, you can find a home that perfectly suits your needs. Don’t let the opportunity to enjoy a new home, a second home, or an investment property pass you by.

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