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Loyola University: “There are conditions that can make the effect not so clear”

The economics professor at the Loyola Andalusia University Carmen López explains that when interest on loans increases to finance the living place, “the logical thing would be to think that this will cause there to be less activity in the real estate market, that people are less willing to buy”, since conditions worsen. In this sense, he points out that “if the cost of loans rises, it is normal that there is less demand for housing and the price may fall.”

However, he clarifies that “there are other conditions that can make the effect not as immediate or as clear as we would think.” Among other ideas, he stresses that interest rates “are low” today; that in Spain “we tend to buy a house” and that, although the drop in demand would be a logical consequence from the point of view of families, there are other investors in the real estate market, for example, institutional investors who buy houses to use them to rent and may not be as affected by the increase in interest. Likewise, he points out that «there are people who invest in the real-estate market as a kind of refuge value, because it has been considered safer in times of uncertainty or inflation. Finally, remember that, especially after the coronavirus pandemic, families are considering the possibility of acquiring homes with different characteristics, “perhaps thinking of teleworking or in areas far from the center of cities, in more affordable alternatives” , point.

This economist highlights that the market “is very broad” and, regarding the possibility that the rise in rates will contract demand, she comments that, in the second hand, the drop in prices could be an option to reactivate the purchase, but in work new could slow down new projects.

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Appraisal

On the other hand, Cristina Arias, director of the Studies service of the appraisal company Forget it, explains that “a contractionary monetary policy such as the one currently being applied by the European Central Bank pursues a moderation of consumption that controls inflation. This supposes the withdrawal of part of the money in circulation in the economy and the consequent increase in reference interest rates. In the real estateThis means more expensive mortgages and more restrictive access to finance for both households and builders. In this sense, Cristina Arias advances that “in the coming months we could expect a moderation in the demand and supply of housing, with opposing effects on prices, and that as a whole we estimate that they would lead to a slowdown in the growth rates of prices ».

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