Pandemic in the Spanish housing market

Abstract

The pandemic and the war in Ukraine have made the 2020-2023 triennium exceptional in the housing market, and although the general consensus highlights the resilience of the sector in the face of the events, the information that can be obtained by comparing quarters or full years does not offer a view of what happened because of the volatility in the data. In the present study, we compare for the three-year periods 2017-2019 and 2020-2022, the transactions carried out, housing starts and completions, in addition to their average price, at the national level and in significant provincial markets, in this way we can see in the three-year period as a whole if the pre-crisis trend continues or not. From the literature reviewed we can see the relevance of local housing markets within a general trend, and together with the analysis of what happened in the Spanish market, we see the repercussions in some representative housing markets. We find that in some areas there are no consequences at all, while in others there is an early recovery. We distinguish between new and used housing, due to the strong differences in their price, with the new construction housing series being bullish versus the relative stability of second hand housing prices. In addition, we will be able to visualize the strong negative correlation between real estate activity measured by the number of transactions and the unemployment rate. Expectations about the continuity in the functioning of the housing market in Spain do not correspond to what happened, but our results are in line with the analyses we collected after the first months of the crisis, which emphasize the still lower market interest rates, and the support of public policy for employment, as well as the balances in the initial situation of the housing market with respect to previous crises, as an explanation for the resilience of the sector. In sum the resiliency of the real estate sector in Spain was mainly the consequence of favourable financial conditions and employment, but in the next future strict finance, higher rates of interest, and low consumer expectation will affect the real estate development.