Spanish residential market: limited transactions and price correction

The strict country lockdown has caused a housing market paralysis in Spain . T ransactions in April are set to have fallen by around 80%. We expect that transactions will regain only gradually strength in coming months due to more protracted negotiations between returning buyers and sellers. While the residential prices have been still resilient (as of April), a significantly lower demand along with different price perceptions in the period ahead will in duce some forced sellers to accept lower prices. Specifically, uncertainty about the health of the economy, fears of a second wave of the virus, insecurity about employment and income prospects and stock market turmoil will weigh on housing demand this year. Overall, we expect residential prices to correct by around 3% this year , despite more viewings and sales in the months ahead. On the upside, medium term prospects look more positive . Stimulus measures put in place by the govern ment will help businesses survive and limit jobs losses , allowing the Spanish economy to regain strength already in H2 2020 . A rebound in economic activity along with no t too deep scar in the labour market will support buyers’ confidence. Overall, a price correction, monetary and government stimulus measures and a relatively limited impact on the labour market will strengthen housing demand later this year.