Real Estate Market Report 1H 2023 - LF

Lucas Fox Spanish Real Estate Market Report / First half 2023

MORTGAGE LENDING

SPANISH NEW MORTGAGE LENDING Source: Notaries

a slump in new mortgage lending when compared to the period before the post- pandemic boom. However, it is too early to say that higher interest rates and borrowing costs will not reduce home sales significantly in the coming quarters, especially in the middle and lower segments of the market where financing is crucial to demand. Until now we have seen the rate hike impact more local and national buyers, whereas sales transactions to international buyers have increased so far this year.

The European Central Bank (ECB) held down interest rates to help the economy in response to the pandemic, which contributed significantly to the boom in sales and prices. However high inflation in 2022 led to a dramatic change in the interest rate environment. 12-month Euribor (the reference for most mortgages in Spain) rose from -0.232% in March 2022 to 3.647% in March this year (and 4% by the end of June). New mortgage lending fell by 25% in the same period, but remains strong compared to the years before the pandemic. The data shows that higher borrowing costs have not translated into

100,000

150%

75,000

100%

50,000

50%

25,000

-50%

Q2 2023

Q2 2014

Q2 2015

Q2 2016

Q2 2017

Q2 2018

Q2 2019

Q2 2020

Q2 2021

Q2 2022

EURIBOR Source: Bank of Spain

5,000

4,000

3,000

2,000

1,000

-1,000