Euribor on the decline, housing prices on the rise?
CaixaBank Research Adjusts its Forecasts for the Real Estate Market, Anticipating a Drop in the Euribor and an Increase in Housing Prices in the Coming Quarters
Judit Montoriol, lead economist at CaixaBank Research, shared these projections during the 4th National Housing Congress in Málaga, organized by APCE. According to Montoriol, the recent interest rate cuts by the European Central Bank (ECB) and further reductions expected in the coming months will drive the Euribor below 2.5%. This context will facilitate access to financing, boost housing demand, and result in a larger-than-expected increase in prices.
Montoriol explained that the Euribor, currently around 3% in September, could drop to approximately 2.65% by the end of 2024, with a further reduction to 2.1%-2.15% in 2025.
Regarding housing prices, CaixaBank Research forecasts a faster increase in the next two years. For 2023, a growth of 4.4% is estimated (based on Ministry of Housing data) or 5% (according to INE), surpassing previous forecasts that ranged between 2.7% and 3.5%. In 2024, prices are expected to continue rising, with an additional increase of 2.8%, three-tenths above previous estimates.
The growth in demand, driven by both the decline in loan costs and population growth, is one of the key factors behind this price acceleration. Montoriol mentioned that current INE projections suggest the creation of 330,000 new households annually between 2024 and 2028, significantly more than the previously expected 215,000.
CaixaBank Research has also revised its housing sales forecasts upwards. Around 564,000 transactions are expected in 2023, exceeding the previously estimated 550,000. By 2025, the volume could reach 566,000 transactions.
As for new building permits, the forecasts remain stable. Around 115,000 new permits are expected for 2024 and 125,000 for 2025, totaling 240,000 licenses over two years. However, this figure is still below the potential demand generated by the more than 600,000 new households expected during that period.
Interest Rate, Macroeconomic, and Construction Cost Forecasts
Montoriol also addressed interest rate behavior and its impact on the economy and construction costs, a critical factor for developers in recent years.
While a rate cut is not expected in the ECB’s October meeting, Montoriol anticipates a possible reduction in December, followed by more cuts in 2025. Interest rates are expected to stabilize between 2% and 2.25%, below the current 3.5%.
Regarding construction costs, these remain 30% above pre-pandemic levels and are unlikely to decrease, consolidating at these levels.
On a macroeconomic level, the economist highlighted the role of domestic demand and tourism as key growth drivers, in addition to improved employment and rising household income. CaixaBank Research will also revise its growth forecasts for Spain upwards, from the current 2.4% to at least 2.7% in 2023, thanks to a more favorable economic performance than expected in the spring.
Information sourced from Idealista.
