2023/Q2 Article 09. The housing supply and demand mismatch and its relationship with house prices
Series: Economic Bulletin.
Author: Lucio San Juan.
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Summary
Rationale
Analysis of recent housing supply and demand trends, and of the factors contributing to them, is extremely useful to detect the emergence or existence of imbalances in the housing market, which is characterised by long lead times for house building.
Takeaways
- After the initial impact of the pandemic, the recovery in demand for owner-occupied housing nationwide has outpaced the recovery in supply, which is less flexible in the short term. This has led to a certain mismatch between supply and demand and to upward pressures on house prices.
- In recent years, there has also been a widespread supply shortage at the regional level. The prices of owner-occupied housing have risen more in regions where housing has been in relatively shorter supply.
- Although the cost of credit has risen, house prices will foreseeably continue to show greater downward stickiness, in nominal terms, than residential housing market variables such as house sales or building permits, owing to the dearth of new construction work, the high costs of building materials and the favourable financial situation of the different housing market agents.