In Spain, housing is going through good times: buying and selling property continues on upward trend and even though prices have increased we should not be afraid of a new property
bubble. Real estate experts coincide on the fact that, currently, there are no signs that can make us think that our country may go through another real estate collapse as in 2008. The reason why we raise the issue of this happening again in Spain is because in other European countries there currently exists this risk. Real estate prices in Eurozone countries have increased quite a lot in the last term of 2021 and, in addition, many mortgages were granted due to the low interest rates, a fact which has set off alarm bells. It is believed that in those countries located in the north and east of Europe there does exist the possibility that their real estate
system might burst. However, should we fear that the same thing can happen in Spain? As we have already said, the experts do not think so. The main reason for this is that, currently, the buying and selling of property is not based on speculative operations as happened in the year 2008. A fact that supports this statement is that, in Spain, homebuyers put 32% of their salary into the purchase of a house being an amount which is regarded as
normal (it is estimated that putting up to 35% of the salary is a
reasonable amount). In 2008, when our real estate system collapsed the amount was close to 45%: nearly 13 points higher.

FACTORS THAT MUST BE TAKEN INTO ACCOUNT

The ghost of a new real estate bubble is not new: some years ago, we wrote about this in our blog. What we had to live through
in 2008 makes us be on the alert constantly so as to avoid making the same mistakes. Factors such as the dropping of interest rates, unemployment and inflation, added to production costs and the scarce availability of buiding land can become decisive factors for a fertile breeding ground that may cause the collapse of the real estate system. If housing prices increase in a disproportionate way due to these factors, then this will cause a real estate bubble which will prove fatal, as we saw in 2008. We must point out that, in those days in Spain we lived through an increase in prices which lasted for more than ten years and that, in many cases, were completely unjustified. Nonetheless, we can state that the banks took note of what happened and so, at present, they make a serious study of the financial standing and creditworthiness of those who apply for a mortgage. The days when nearly everybody could be granted a mortgage loan no longer exist.

NEW CONSTRUCTION VISAS: A GREAT DIFFERENCE

It is true that, at present, we are going through a small boom in our real estate system due to the increase of deals as well as of prices. Nevertheless, we should not compare this current situation with the one that took place during the years of the real estate bubble. The pandemic completely paralyzed the market and the confinement brought about a capacity for saving in the families which, in turn, provided the impetus with which everything has reactivated. If we take a look at the facts and figures of new construction visas it may allow us to compare the current situation with that of the real estate bubble: in the year 2006 there were 865.000 visas, whereas the figures expected for 2022 are estimated to be around 100.000 (some believe they will be around 90.000). This shows 12% of the number of visas that were granted in those days and, therefore, making it obvious that the uncontrolled housing construction of those days has nothing to do with the situation nowadays.

Picture 01: jcomp

Picture 02: freepik