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Home purchases fell 22.4% in the worst April since 2020 due to the rate hike

Date: February 24, 2024 Time: 21:24:35

Activity in the Spanish real estate market is being greatly affected by the rise in interest rates that the European Central Bank (ECB) has been applying since July last year to stem the rise in prices. The increase in the cost of financing that this rise has entailed -both in the case of the supply of fixed-rate mortgages and variable-rate mortgages due to the Euribor rally- has caused a drop of 22.4% in the sale of homes in the past month of April in relation to the previous month up to 43,311 operations, in its third consecutive month of decline.

This number of operations also represents a decline of 8.1% in home purchases compared to April 2022 and marks, in fact, the worst record for this month since the outbreak of the Covid pandemic in 2020. According to the Statistics of Transfers of Property Rights (ETDP) published this Monday by the National Institute of Statistics, in the first four months of the year real estate sales fell by 3.4%.

The setback will be due both to the drop in operations on second-hand apartments and those carried out with new-build homes. However, the used ones – which continue to represent the vast majority of acquisitions – were the most affected with a decrease of 9% to 35,057. This is its biggest withdrawal since January 2021. New property purchases fell 4.2% to 8,254. Nine out of ten habitable homes for sale throughout the fourth month of the year were free homes and 8.1% were protected.

It is also noteworthy that, in this environment of higher financial costs, the number of home purchases and sales that were carried out between individuals stood at 29,533 transactions in April, which represents a drop of 10.2% in relaxation at the same time. month of a year ago By province, the autonomous communities with the highest number of transmissions per 100,000 inhabitants were the Valencian Community (166); Cantabria (135), and Andalusia (131).

Two of these three regions are also those that registered the greatest increase in operations throughout the country: Cantabria (11.6%); Valencian Community (6%), and Extremadura (3.7%). Meanwhile, the Basque Country (-23.4%), the Balearic Islands (-19.6%) and La Rioja (-18.6%) were affected by the greatest drop in sales.

New ECB meeting with more rate hikes expected

The statistics data have been made public shortly before a new meeting of the governing council of the European Central Bank, to be held on Thursday, in which the entity is expected to raise again in the Eurozone (the reference rates are located currently at 3.75%). This fact, and the issuer’s insistence that it will continue with its policy to bring inflation to its medium-term target of 2%.

This, despite the fact that the region’s economy is already showing clear signs of weakness, having entered a technical recession in the first quarter, when its GDP contracted by 0.1%. The president of the entity, Christine Lagarde, made it clear last week that core inflation (which excludes energy and fresh food prices from its calculation and usually shows more structural tensions) has not yet peaked. In May the rate moderated three tenths in relation to the previous month to 5.3%.

The fact that the ECB maintains the harshness of its speech – and its objective of continuing to cool the economy to reduce the pressure of the shopping basket in the pocket of consumers – implies that the cost of borrowing will continue to rise for the time being. The supply of credit has also been restricted because banks support the conditions to grant it due to the fear that possible defaults may occur, although Spain maintains a very low rate of delinquency.

The latest information made public by the Bank of Spain shows that the default rate on loans granted by banks fell in March to 3.51%, its lowest level since December 2008, with a further fall in the balance of unpaid loans. Looking ahead to the coming months, the entities expect the volume of mortgage renegotiations to increase due to the rise in the Euribor. This is fully impacting the installments of variable-rate mortgages, especially those that were signed in the last five or six years, and that have not finished experiencing the entire rise of the reference index.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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