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Will Spanish Housing Prices Fall if Interest Rates Rise?

20 mins
13 MAY, 2021
análisis macroeconómico
Leopoldo Torralba
Ignacio De la Torre
Monetary Policy Real Estate Spain AER España AER Global
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Arcano Economic Research have been anticipating for a few quarters now that the economic recovery in 2021 will come earlier and stronger than the economic consensus is expecting, a message that is starting to resonate. In our opinion, an issue of growing concern will be the related potential acceleration of inflation, which we anticipated before the summer of 2020. Moreover, the risk of inflation may trigger an interest rate hike. In fact, markets are already discounting that main central banks will start to raise official rates by late 2022 (Fed) and 2024 (ECB), though moderately.
Would Spanish real estate sector fundamentals hold up and prices remain stable should a strong interest rate hike take place?
What do house price indicators such as mortgage affordability ratio or rental yield reveal?
What is the expected performance of Spanish housing prices in a scenario of mounting long-term sovereign bond rates?

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