We salute a 2023 marked by the enormous resilience that the real estate sector (and in particular the new construction segment) has demonstrated in the face of a context of macroeconomic uncertainty and global volatility. And we welcome the new year 2024, which everything indicates will bring stabilization and normalization.
In 2024, the strengths of the residential new construction market will continue to consolidate, which advances on solid fundamental pillars, such as the structural imbalance between strong demand and limited supply. The development sector produces only 80,000 homes per year, while the market requirement amounts to 120,000-140,000 units and 240,000 new homes are created in Spain every year. Furthermore, development companies continue to maintain a low level of debt, banks continue to demonstrate discipline and rigor in providing financing to the sector and households have a significant level of savings.
The positive prospects of the real estate sector for 2024 are also linked to inflation that is already more or less stabilized with frozen interest rates and expectations of a decline in sight. Without a doubt this factor is crucial for a real estate sector that requires a lot of capital; and it is very positive news for the street real estate market, since it means more competitive mortgages and, therefore, a predictable increase in sales, which in 2023 will once again be around 600,000 units (both new and used), an optimal level.
With all of these ingredients on the real estate table, and in response to recurring demand, newly constructed home prices will continue to show strength, fundamentally, because demand will continue to outstrip supply. As a percentage, sustained, moderate and healthy increases of around 3%-5% are expected in 2024… if no major macroeconomic and/or geopolitical shocks occur.
However, 2024 will also be a year of challenges for the development sector, which will continue to address outstanding tasks, such as the shortage of final land – which is causing inflationary tensions – and which requires public participation to increase this supply; access to affordable housing, whether rented or owned, especially for younger generations; or the necessary transition towards an industrialized building model less dependent on an increasingly scarce and less qualified workforce; or continue to retain and attract capital.
This point deserves a special stop. The real estate sector is a capital-intensive sector: to produce 100,000 homes in a sustainable way, at least 5,000 million euros of capital and another 15,000 million of debt are needed every year. It is therefore essential to establish a safe, stable and predictable legal framework, in which the rules of the game are not constantly changing and which investors can trust. We must be aware that the current level of uncertainty in processing and obtaining licenses, or in urban planning procedures or insecurity in housing rental, scares capital and discourages those who at some point will be willing to invest in the production of housing in Spain. It is time for courageous political decisions that provide us with a stable security framework.
2024 will also reinforce multiple trends that will continue to improve the industry. Its transformation into a full-fledged industry will continue to accelerate thanks to industrialization-based Modern Methods of Construction (MMC); it will increase the commitment of companies and projects towards environmental sustainability – there is no other way; Companies will further improve digitalization and, above all, the implementation of artificial intelligence; and we will see how the new ‘living’ residential concepts will consolidate in Spain thanks to co-investment and public-private collaboration (BTR, co-living, senior living, student residences, etc.).
I conclude as I began, with a title: 2024 will be a more innovative, as well as exciting, real estate year, as always. Let’s enjoy it. Happy and productive year 2024!
2023-12-29 00:59:14
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