The European Central Bank (ECB) has raised interest rates again, to 4.5%, and with it, the cost of financing has increased. While this is a conditioning factor for the residential market, it is also revealing the strength of the new-build market and, specifically, the strength of new-build buyers, as reflected in recent data published by Spain’s National Institute of Statistics (INE), and which AEDAS Homes includes in its 'Analysis of current demand for new-build homes'.
Despite the rate hikes in the past year, INE reported a total of 60,426 new-build home sales finalized in the first half of 2023, a figure which is practically identical to the same period in 2022 (60,626), when interest rates were at 0%. This solid demand for new-build homes is also backed by the evolution in the price of new-build homes, up 7.7% year-on-year in the second quarter of 2023.
AEDAS Homes exemplifies the new-build market’s resilience in the face of rising interest rates, as reflected in the company’s sales levels. Despite the current macroeconomic context, the residential developer sold 449 homes to private customers between April and June 2023 at an Average Selling Price (ASP) of €465,000, 21% higher than the company’s overall ASP in 2022.
This strength of the AEDAS Homes customer is based on two fundamental pillars: economic solvency and financial capacity. One in three customers anticipate purchasing their new home in cash, and for those customers who do require financing, they request on average only 62% of the purchase price.
This mid-high customer profile is also characterized by a significant percentage of families who are trading up. In fact, one in four AEDAS Homes customers are current homeowners, so they have the option of either selling or renting out their current home to secure significant liquidity if needed. Furthermore, nearly a third of AEDAS Homes customers are acquiring a second home, and 14% purchase a property as an investment, that is, these are fundamentally solvent customer profiles, primarily middle-aged couples (average age of 47) who already own a home and seek a new home that better suits their needs.
Negligible level of cancellations
This well-positioned, resilient customer profile is reflected in an ASP of €465,000, a figure in line with the initial budget customers have in mind (around €460,000) and which reveals that these are well-planned, solid purchases. As a result, the company has a negligible level of cancellations, estimated at less than 1% of private contracts.
Buyers: 60% national and 40% international
“Without a doubt, the healthy financial position of the AEDAS Homes customer, in the mid-high segment, puts the company in a privileged position in the market at a time of uncertainty driven by rising interest rates and inflation”, explained David Martínez, CEO of AEDAS Homes. Mr. Martinez also highlighted the large presence of international buyers, who accounted for 40% of the company’s sales between January and August 2023, primarily in the second home market, as having “elevated levels of purchasing power”.