Housing prices will not reach their rock bottom level until 2016: “We will not return to the previous madness”.
Housing prices will reach their rock bottom level in the third quarter of 2016 if the current descent pace, between 7% and 8%, continues, as declared today by the founder and president of the website Idealista.com, Jesús Encinar, who has dismissed that the slow down in the descent means a later rebound.
“We will not return to the previous situation of madness”, he has assured in a speech at the business school ESADE, where he has predicted a stabilization of prices. Encinar has indicated that the pace of the reduction of prices has been slow in the last few years, which has caused that the current offer is an average 20% higher than the amounts the potential buyers are ready to pay.
He has also pointed out that the stabilization of prices will not take place homogeneously in the real estate market, but will depend on the type of property and its location. He has then detailed that the small homes, with fair prices and in modest neighborhoods are the first ones to adjust their prices, while the more expensive and bigger ones are the last ones to do it.
Encinar has indicated that these forecasts are very much influenced by the behavior of the Spanish and European economy, which in his opinion, has not started the way to recovery. “Those who told us that there was not a real estate bubble are now saying that we have reached our rock bottom level”, he has declared. He has declared that the number of transactions will continue decreasing during the next few years due to the lack of mortgages, as those granted by banks are used to finance those buying properties out of their own stock. He has also reprimanded the financial institutions for making the same errors as in the past when they grant loans “to the same profiles”, that is, to people that will not be able to return the lent amount. Encinar thinks that this behavior is based on a strategy of the institutions, which intend to reduce their stock of properties, while ensuring they will recover it once the debtor fails to pay the installments.
The president of Idealista has stressed that these factors have caused a growth of the payments in cash, which represent two out of three transactions in the real estate market, an amount which reaches 90% in the luxury segment.
Encinar has predicted that all these changes in the real estate market will lead to a scenario where rentals will be preferred, sales will decrease and it will be necessary to build in urban areas, where the stock in nearly non-existent, while the great developments in deserted areas will remain empty.