Appraisal Society finds many buyers backing out at time of mortgage signing due to loan hardening
The rise in borrowing costs due to the rise in European Central Bank (ECB) interest rates is forcing many homebuyers to change their dream of becoming a homeowner. And it is that the time that passes from the moment when the decision to buy a house is made until the operation is formalized has this time left a heavy bill on the citizens.
The CEO of Sociedad de Tasación, Juan Fernández-Aceytuno, acknowledged this Wednesday that the entity has begun to detect a large number of operations in the off-plan purchase and deposit phase that are now beginning to be canceled given the impossibility of the owners to access a loan that, on the one hand, is now much more expensive than when they decided to buy the house and, on the other hand, has higher requirements for its granting.
In general, when buying a home off plan or under construction, it can take an average of 18 months to two years for the deed process to arrive and the notary to apply for the mortgage. For example, someone who started the purchase process a year and a half ago may now have more difficulty financing it “because their initial calculation of a rate of 0.8% has now become 4%.”
As stated by the Appraisal Society, this trend is not exclusive to some regions, but “generalized” across the country. A situation that in turn leads to more negotiations between buyers and sellers. Something that mainly occurs with used homes, since in the new ones the stock is currently “very limited” and that bargaining position is less. «With new homes, the small stock is found because there is a lot of time to make a decision. In cities like Madrid, Barcelona, Malaga, the islands… it disappears from the market in 15 days,” says Fernández-Aceytuno.
In general, the available new build stock on the market is insufficient to meet current demand. Currently, construction is five times less than 15 years ago: for reference, almost 650,000 new building permits were granted in 2007, compared to 100,000 in 2022.
These signs of burnout are common in the industry. And although a collapse of the market is not expected – especially in terms of prices – the experts do make it clear that “since November there has been a clear decline in both buying and selling transactions and in the provision of mortgages”, more and more expensive and more demanding at the time of concession.
Sociedad de Tasación has also detected another important trend in the rental market: according to the data they process, the average amount of formalized leases increased by 14% in December compared to a year earlier.
“Current revenues, in turn, are also growing, but they are doing so in a more stable way, with an average increase of 5% per year,” they indicate.
As for the impact that the 2% limit on price increases may have on contract renewals, experts rule out that it will be negative. That is, they don’t see the speech solid from those who think this cap will limit supply. Especially since, according to the data they process, the owners would take advantage of the gaps in the standard to get around this limitation.
As they point out, it has been found that many of them, at the time of updating the contract, decide to renegotiate “from scratch” in order to apply a new lease at a higher price. And the same happens among those who take advantage of the fact that the law not only sets the 2% limit, but also “what has been agreed between the parties”.
This last point has led to cases such as that of MC, who currently lives for rent with his partner in an apartment in the center of Madrid. In September, the first extension of their contract expired and the landlord offered them a price increase of 5.5%. The alternative? Leaving the flat, so they accepted the agreement.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
