The last quarter of 2024 is shaping up to be quite interesting for the real estate and housing sector due to a trend shift that many have been anticipating: the drop in the Euribor and interest rates. We have closed August with Euribor close to 3% and this figure is expected to fall further in September and December. This movement, driven by more flexible monetary policy in response to signs of a global economic slowdown, presents both significant opportunities and challenges for the real estate market, especially for startups and companies in the scale-up phase.
The reduction in interest rates has an immediate effect on credit accessibility. Mortgage loans become more affordable for a larger number of people, which can potentially stimulate demand in the real estate market. This is particularly relevant for real estate startups focusing on the residential segment, as increased demand for housing could translate into higher transaction volumes and, consequently, increased revenues.
Innovation as a growth lever
This environment of falling interest rates opens the door to innovation in financial products. Real estate companies have the opportunity to develop solutions that better meet the needs of today's buyers, such as flexible mortgages, financial planning tools, and personalized advisory services. The market demands more sophisticated and accessible financial products, and this is where we can make a difference by offering advanced technological solutions that simplify and optimize the property acquisition process.
Additionally, digital real estate agencies are in a unique position to lead this transformation by offering more efficient and personalized services. From implementing artificial intelligence to improve property recommendations to using blockchain to secure transactions, technological innovation is key to standing out in an increasingly competitive market.
Furthermore, the drop in interest rates can facilitate the expansion of business lines. Real estate companies can diversify their services beyond brokerage, venturing into areas such as rental management, crowdfunding for real estate projects, or even developing platforms that integrate multiple services related to buying and selling properties. The ability to quickly adapt and offer an ecosystem of integrated solutions can become a crucial differentiator.
It’s not all opportunities, challenges remain
Although we generally view the interest rate drop as a stimulus for the economy and real estate market, it brings a series of challenges and risks that we must keep in mind.
For example, easier and cheaper access to credit will drive up demand, and if this occurs in areas with high real estate demand, the consequence could be rising prices—a situation that must be monitored to prevent a real estate bubble.
Another challenge is market saturation. While more people will be able to purchase homes, an excess of buyers could lead to fierce competition for available properties, further driving up prices and leaving some segments of the population without accessible options.
Moreover, there is a risk associated with credit lending. The ease of obtaining loans could lead to a relaxation of credit standards, increasing the risk of future defaults. This would not only affect financial institutions but could also trigger a crisis of confidence in the sector.
In conclusion, the interest rate drop favors real estate transactions, making it a great opportunity for the sector. Companies will be able to roll out new products and services, benefiting from an increase in customer demand. However, this interest rate drop requires a clear risk management strategy and a prudent approach to lending by banks and financial institutions.
As interest rates are expected to continue to fall, an interesting end to the year for Real Estate is foreseen, and, consequently, a 2025 that marks a change in trend with what we have seen in recent years. We will continue to keep an eye on any outstanding developments to provide new insights.