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Real estate market trends 2023: What will happen with apartments?

10 MAY 2023
real state trends

What will happen to apartment prices in 2023? And what about mortgages and interest rates? Will we see a definitive upswing in rentals? Will it be impossible to buy a house? The trends in the real estate market in 2023 come with more questions than answers. However, the most important thing is that buying a property is still a goal for many people.

These are the trends for what can happen in the real estate market in 2023.

Rise of the Euribor and interest rates

It is one of the few certainties: Euribor will continue its upward trend in 2023, although not as strong and intense as in 2022.

The forecast predicts that after reaching the 3% range during the year, it will navigate below 4%. As José Manuel Fernández, deputy general director of Union de Créditos Inmobiliarios (UCI), explains, "We have seen this in the American market, which usually leads by six months, and everything indicates that inflation in the euro area and particularly in Spain will begin to moderate throughout 2023."

As the expert notes, the key will be what happens with inflation. If inflation decreases, central banks will have less incentive to increase interest rates.

More expensive mortgages

Where the money goes, interest rates also follow the cost of mortgages. If interest rates and the Euribor remain high, the price of mortgages will also rise.

In summary, we can expect more expensive mortgages in 2023 than in 2022, which we have already felt since the beginning of the fall. It is one of the effects of the increase in the official interest rate: the cost of financing rises.

Balance between fixed and variable mortgages

The low-interest rates of recent years have even encouraged the uptake of fixed-rate mortgages over variable-rate mortgages.

The drastic rise in interest rates has taken away the appeal of fixed-rate mortgages. We believe that interest rates between fixed-rate and variable-rate mortgages will get closer. In other words, the uptake of variable-rate mortgages will increase.

One option that has already grown in the last quarter of 2022 is mixed mortgages, where customers begin with a fixed rate and then switch to a variable rate.

Sustainability, environment, and renovation

Since Spanish apartments are among the oldest in Europe, energy prices are rising. At the same time, environmental awareness is increasing. 2023 could be the year of house renovation.

In addition, there are tax subsidies for work to improve the energy efficiency of apartments and the Next-Generation Funds to make the home more sustainable. This situation will encourage many owners to opt for it.

Also, it will lead to more renovations after buying an apartment, not only for aesthetic reasons but also for energy consumption and comfort.

If this is your case, there are two specific solutions for these situations. The first is a purchase and renovation mortgage, ideal for those who want to buy a house to renovate it according to their wishes.

The second is green mortgages, which improve loan terms when buying a sustainable home.

Increase in rental prices

Shortage of supply will lead to further increases in rental prices in 2023. Difficulty in finding and financing an apartment will ensure that demand for rental properties remains high. On the other hand, measures to control price increases can cause some owners not to rent their apartments, further limiting the supply. José Manuel Fernández from UCI believes that "greater job security for people under 35 and government support through tax measures will be crucial to reversing this situation."

Adjustment of housing prices, but by zones

Will the price of housing fall in 2023? After two years of rising prices, some think 2023 will bring the final adjustment. However, the price development in the real estate sector will not be homogeneous in 2023. These price changes will vary by province, city, and even neighbourhood.

Nowadays, many areas and cities are highly solicited, places where we do not anticipate price corrections. Additionally, the deputy general director of UCI reminds us that we saw a critical price adjustment in Spain between 2008 and 2014. Moreover, in most zones, the level of 2007 has not yet been reached. Therefore, we do not rule out significant price declines in any market. And in the tensest markets, we will continue to see moderate price increases.

More used properties

Used properties will continue to be the queen of the market. The first reason is that there are areas and neighbourhoods with used properties only, many of which are among the most demanded. So, if you want to live in the center, you will likely buy a second-hand apartment. The second reason is that in 2023, the trend of little new construction and much selected new construction will continue. The reason, as José Manuel Fernández reveals, is that "the price levels reached due to the strong increase in costs for materials, energy, and labour make this type of property unaffordable for most buyers." Additionally, developers have learned from their past mistakes. They have been focusing on safer work for years, with developments where they know there is a genuine interest in buying. In summary, 2023 will be characterized by

increasing mortgage costs, the balance between fixed and variable loans with an increase in mixed mortgages, and the purchase of used properties for renovation thanks to assistance and subsidies such as the Next Generation EU fund.

The UCI blog posts cover current issues that are intended to be useful to our readers. However, it is possible that some of the less recent posts contain out-of-date information, so it is necessary that you always check the publication date of the post.