Biggest housing slowdown in years as interest rates rise

Housing slowdown deepens and prices hold firm

The first signal came over the radio: a slowdown in the housing market, described as the strongest in years and attributed wholesale to rising interest rates. The sector, which until recently was selling developments without breaking a sweat, is starting to accept that the cycle has turned. And yet prices remain exactly where they were. That's the crux.

Why sales are falling but prices aren't

Fewer sales don't miccionan lower prices. That's the thesis most repeated when analyzing the stall: if less is built, the little that reaches the market will do so in an even more overheated environment. The comparison with automobiles serves as a shortcut: factories are producing far less than before and cars are more expensive, not cheaper.

The other set of arguments looks at production costs. Building anything has become 15% to 20% more expensive in a few years, according to the calculation used in the thread. The removal of the 20-cent diesel subsidy hit excavation hard, and aluminum, from which all window frames are made, has been unchecked for two years. With that cost structure, the conclusion is uncomfortable: everything will cost more and very few people will be able to buy.

Not everyone sees it the same way. Some argue that aluminum and steel have already corrected and that this cushion should be passed on to the final price. So far, no one has seen it in the listings.

The fine print of a 600,000-euro purchase

The calculation that best explains why the market has dried up doesn't talk about mortgages, but about what you pay before owning anything. On a property of 600,000 euros, between ITP (property transfer tax) or VAT and interest, some 84,000 euros go just in the first year, without having paid off a single euro of the home. The second year, another 24,000 between interest, IBI (property tax) and associated costs. At least, that's the calculation repeated in the thread.

High prices, high taxes, and high rates on Spanish salaries. The equation needs no further embellishment.

From 120,000 to 160,000 euros for the same house in six months

There is a case that sums up the period better than any statistic. A couple buys a plot about 40 kilometers from Madrid to build from plans and receives a quote for 120,000 euros. They give the go-ahead. The war in Ukraine breaks out and the same builder revises the number: 140,000. Less than a month passes and a third quote arrives, again with the war as the argument: 160,000 euros for the house that half a year earlier cost 120,000. They throw in the towel.

That differential is what many point to as the real wall: it's not that the developer doesn't want to lower prices, it's that construction costs have spiraled out of control.

Málaga: skyscrapers that locals don't buy

The phenomenon is not only in major capitals. In Málaga, according to the reading of the local market, less and less is built and what goes up sells for a fortune, with rents unthinkable for residents. Towers and skyscrapers that transform the city, but not for those who live in it. The mayor of Málaga has been in office for more than two decades and absolute majorities have not budged.

It's the local version of a general pattern: housing as a business first, not as a service.

Regulated land, taxes and a currency losing value

Here the diagnosis splits. One camp insists that liberalizing land doesn't make anything cheaper, that it only benefits investors with the capacity to hoard. Another points to the State: if everything taken along the way —licenses, fees, taxes— disappeared, the price would fall, although they suspect that gap would be filled by the developer's margin, because here no one gives up their cut.

Add to that the loss of purchasing power of money. With a currency worth less and less, nominal housing can hold or rise without anyone gaining anything real.

The price ladder: two steps up, one down

The historical series used in the conversation is simple: from 1997 to 2008 the price went up two steps, from 2008 to 2013 it went down one, and since 2013 it has gone up two again. With that geometry, the fall expected for the next stretch would be a single step, not the collapse some anticipate.

In the detail, however, the market is already moving. Some report reductions of 400,000 euros on a price of one and a half million —26%— or homes that have gone from 1.6 million to 1.0 in the year. Sellers with the house on the market for a year and 10% already cut without a buyer. Real estate agencies calling those who asked months ago to see if they're still interested. And the 200,000 homes promised that, according to the review being done, have not yet translated into cranes.

Where the analysis gets stuck is here: if costs don't give way, rates remain high and land is regulated, the widespread reduction would have to come from the seller's necessity. And necessity, by definition, doesn't reach everyone at once.