Housing 2021 Groundhog Day?
Housing 2021 Groundhog Day?
Are we approaching the bursting of a new housing bubble?
We have been in the pandemic for a year now and this is the third wave, with forecasts of a fourth one. We hope that mass vaccination of the population will improve the outlook. In any case, the macroeconomic figures are, to say the least, worrying.
On the one hand, the slowdown in the economy has been enormous, with a drop in Spanish GDP in 2020 of 11%, a figure never seen before. At the same time, debt, which was already above GDP, has skyrocketed in these times of scarcity.
For obvious reasons, second homes in tourist areas, as well as the second-hand housing market, are now suffering a major setback.
For its part, it seems that the residential housing market is repeating the steps of the real estate bubble of 2008. At that time, in six years the average price per square meter fell by more than 30%, in the most devastating crisis since the 1980s, with an equally spectacular drop in the number of sales and purchases. In the previous years, from 1990 to 2007, prices had multiplied by three, producing the well-known bubble.
Housing Bubble 2008. Sociedad de Tasación
A huge number of companies in the sector went bankrupt, pulverizing the previous scors of liabilities on their balance sheets, at the time of their crashes.
According to the forecasts of la Caixa, published at the end of last year, “the price of housing will decrease in 7 out of 10 Spanish provinces in 2021 and will grow very moderately in the rest” According to the same bank, these forecasts would be of a great precision, since they have been deduced from Big Data samples, extracted with the help of Machine Learning, a type of artificial intelligence.
Despite this, there are encouraging data for 2021 and 2022. According to Bankinter, also published at the end of last year, European funds for the recovery, allow it to forecast a rise in GDP of 6.5% in 2021 and 5.2% in 2022, which would allow the counter to be reset to zero, so to speak.
This could mean that, despite the fact that housing prices and sales volumes will decrease, we could see a much faster market recovery than in the preceding crisis.
External links:
La Caixa – How will house prices in the Spanish provinces evolve in 2021?
Bankinter – Spain’s GDP forecast for 2021 and 2022
University of Wisconsin – What is Big Data?
IBM – What is machine learning?
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