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CaixaBank Research forecasts housing price declines of 15% over the next two years

The analysis service of the CaixaBank financial group forecasts that the real estate market could correct housing prices by nearly 15% by 2025, as a result of rising interest rates.

Global house prices went from rising 2.8% in 2019 due to the pandemic, to 4.5% in 2020 and then 11.8% in 2021, according to the report Real Estate Markets in Advanced Economies in the Face of Tightening Monetary Policies. This is due to high inflation. The analysis service calculated the fall in house prices needed to bring house prices based on household disposable income back to the level before the outbreak of the pandemic.

According to the report, "it is not estimated that a material adjustment in house prices is necessary in Spain". And despite potential adjustments, house prices would still be above the December 2019 level at the end of 2024.

Among the countries included in a worrying group are New Zealand, Canada, Australia, the United States, the Netherlands, Luxembourg, Sweden, Denmark and Norway. The price spike was accompanied by an increase in household debt.

In a second risk group: Portugal, Germany and the United Kingdom.

The report's analysis suggests that, "it takes about eight quarters for rate hikes to be fully passed through to house prices, pointing to a gradual cooling of housing markets that could extend through 2023 and 2024." 

In the United States, the estimated sensitivity of real estate prices to interest rates is not among the highest, but monetary tightening has been. This translates into a high correction potential (almost 20%). Estimates for the European area are similar, although slightly more moderate due to the lower interest rate tightening (potential of slightly less than 15%). 

CaixaBank adds that abrupt falls in housing prices are not expected, but rather progressive falls until 2025. They have also highlighted several highlights and positive points in the face of price problems. These include the fluidity of the labor market, lower household indebtedness and healthier balance sheets in the banking system.

Finally, they also mentioned that the Spanish real estate market is in a good position.