Price of housing rises back to pre-pandemic levels

BarcelonaThe price of flats is again increasing at pre-pandemic levels, after the 2020 hiatus caused by the impact of covid-19 on the economy and the housing market, according to data published this Friday by the National Statistics Institute (INE). It reports that in Catalonia this year's third quarter recorded a similar growth to the fourth quarter of 2019, while in the State as a whole the increase during the third quarter was the highest since the third quarter of 2019.

Thus, the price of housing in Catalonia rose by 3.3% year-on-year in the third quarter, according to the INE. It is a tenth more compared to the annual variation of the second quarter, which was 3.2%, and the highest rise since the fourth quarter of 2019, when it was 3.4%. As for the quarterly variation, the price of housing increased by 1.3%, a figure that represents a decrease of 1.2 points compared to the variation of the previous quarter. In the State as a whole, the annual variation of this index in the third quarter rose nine tenths and stood at 4.2%, the highest since the third quarter of 2019.

By type of property, in the whole of the State the annual variation in the price of new housing fell almost two points, to 4.1%, while that of second-hand housing reached 4.3%, almost a point and a half above the figure recorded in the previous quarter. As for the quarterly variation, the overall index in the third quarter of this year was 2.1%. In Catalonia, the price of new flats grew by 1.8% year-on-year, i.e. 4.7 points less than the variation in the second quarter of this year. In contrast, for second-hand housing, the year-on-year variation was 3.5%, six tenths more than in the second quarter.

For the director of studies of the website Pisos.com, Ferran Font, INE data show that the third quarter of this year "consolidates the change in the evolution of prices that had begun the previous quarter and the figures return to the pre-pandemic level. For Font, the change in trend "is evident" and it remains to be seen whether in the next quarters the increase in prices accelerates, as demand is stable and offer is scarce.

Miquel Morell, of the Col·legi d'Economistes de Catalunya, agrees with this assessment and provides data. Before the housing bubble burst, in the period from 2000 to 2007, in Catalonia there was an average of 10 new homes finished for every 1,000 inhabitants, and now this ratio has fallen to 2 new homes. For Morell, this lack of structural supply is one of the factors driving up prices.

Impact of inflation

But, in addition, this economist indicates two more factors are also making prices rise. On the one hand, "the saving capacity of a sector of the population has increased during the pandemic. This factor, coupled with low interest rates, has made real estate become "an investment alternative".

But Morell also warns of the impact that current inflation in the real estate market can have. If this temporary inflation ends up becoming structural, it will lead to a reaction from the ECB and a probable rise in interest rates. On the other hand, it remains to be seen what effect rising construction costs have on housing prices.