Overseas Property Market Spain 2022

The Spanish property market may be anticipated to be on its knees after a second year affected by the Covid-19 outbreak, particularly in regard to foreign purchasers, considering the travel restrictions that existed for much of the time. A more positive picture emerges, though, when we take a look at the most current figures. Astonishingly good numbers of transactions are still being processed despite the issues posed by the epidemic As a result of the epidemic, prices have increased at the high end of the market in some of the world’s most desirable destinations.

The impact of the Omicron variation is yet uncertain, although foreign buyers’ sustained interest in Spanish property in 2021 suggests some confidence for 2022. In my opinion, the pandemic will be a boon to the global market’s abroad sector, not because of it but because of it. We’ll have a better sense of the changes in consumer behaviour as time goes on. It’s safe to say that the Spanish property market won’t be in ruins by 2022, no matter where it is. If you are thinking of buying or selling a home, apartment or villa in Spain this year here are some good facts.

 

 

Why are there so many?

Counts of transactions by nationality, autonomous areas, and prices per square metre may be obtained from the Notaries. At least twice a year, these are released. A year from now, the first two quarters will be released in November, followed by the third and fourth quarters in May. That implies we’ll have to wait until May 2022 to get the entire picture of what happened in 2021. But thus far, the results are good.

In addition, I examine Ministry of Development (Ministerio de Fomento) data for each province and municipality. However, international purchasers are not divided into groups based on nationality; instead, they are treated as a unit.

In my opinion, numbers from the Property Registries should be ignored since they only count when a property is registered in the registry, not when it is finished in front of a notary. Even in normal times, inscriptions may arrive weeks or months after projects have been completed. Notaries and Property Registry data always diverge, sometimes by a wide margin. Most of the time, they are 20–25 percent out of sync with one another As a result, Notaries’ returns are based on the date that a transaction is completed rather than the date that the transaction was initiated.

 

This report will make very few references to 2020 data in general since I don’t believe they teach us very lot about the future. However, if they are useful, I will provide some data from 2019 because they show how the market was pre-pandemic.

 

 

Where we ended up

Foreign purchasers accounted for 8.9 percent of the market share in Spain’s property market at its peak following the 2008 global financial crisis. Over the course of many years preceding to the financial crisis, Spain built more new homes than the United Kingdom, France, and Germany put together. The market was fueled by low-cost loans and speculative activity, and it was inevitable that the bubble would pop. The worldwide catastrophe was only a stepping stone to its ultimate goal.

Since 2012, the number of people working in the foreign industry has grown steadily. As a result, by 2014, the domestic market had shrunk by 60% in transaction terms compared to its peak.

However, after eight years of steady expansion, the market share of international buyers reached 19 percent by the end of 2019. Indeed, it had been hanging around the 20 percent mark for a long period of time. In addition, this market segment was 77% larger than it was prior to the financial crisis. The domestic market, on the other hand, had a far slower recovery. Domestic property in Spain was still 40% smaller than it had been a decade earlier when Covid-19 arrived.

 

Spain’s Real Estate Market Requires Foreign Buyers

It’s apparent that overseas purchasers represent a significant element of the total Spanish property market, regardless of transaction counts or market share. Before the epidemic, there were more than 100,000 foreign purchasers. 100,116 was smashed in 2017; 103,677 set in 2018; and the all-time high of 102,264 was reached this year. There were a record 50,534 international purchasers in the 2nd half of 2019 therefore the abroad industry was looking positive for 2020. And it’s true that business was brisk in the first quarter of 2020. Then, of course, came the epidemic.

Taking a look at the reasons why so many foreigners are interested in purchasing property in Spain before diving into the data is a good place to start.

 

Why Invest in Overseas Property in Spain?

Spain is a great place to live since it’s easygoing, safe, and kid-friendly. Between 1970 and 2015, life expectancy increased by 10 years. Men in Spain may expect to live to an average age of 80, while women can expect to live to an average age of 85. But only by a few months do Japan and Switzerland outperform the other two countries.

 

All tastes are catered to by the weather. It varies from four seasons in the north to sub-tropical conditions in the south. Andalucia’s Mediterranean beaches offer the finest winter temperatures on the continent, thanks to microclimate zones. The Canary Islands, frequently referred to as Europe’s Caribbean, have even milder winter temperatures. More than any other country, Spain’s beaches and marinas will have 696 Blue Flags in 2021, an all-time record and an increase of four from 2020. Every year since it began in 1987, Spain has been ranked first in the annual rankings.

Spain offers some of the world’s oldest cities and 49 UNESCO World Heritage Sites to offer the cultural traveller. Third internationally, behind Italy (58) and China, with this achievement (56). Andalucia is the area of Spain with the most recognised sites, with eight.

Food and drink prices are lower than the European Union average, making it possible to live comfortably on a budget. By way of Eurostat. Spain’s food is among the best in the world. Currently, Spain has the most top-ten and top-20 restaurants in the world, with two and five, respectively, on the list. Sport and outdoor fans have a wide range of options to choose from. Sporting activities abound, from golf to tennis to equestrian to skiing to wind- and kitesurfing to mountain biking to rock-climbing to hiking to fishing. For international second-home owners and permanent residents alike, Spain boasts a quality of life that’s hard to surpass. There hasn’t been any shift in the factors that have attracted tens of millions of international purchasers to Spain in the past. There’s no doubt about it: the sun is still out.

 

2020/21: The Year of the Absent International Consumer

A total of 77,496 foreign property purchases were recorded for the entire year 2020, according to the figures. In the three years before to the pandemic’s arrival, an average of 25,000 international purchasers who may have fairly been anticipated to purchase in 2020 were not. We can now estimate that 30,000 foreign purchasers went missing between March 2020 and June 2021 based on the notary records for the first half of 2021. This time period encompasses the height of the lockdowns and travel restrictions. However, according to the same data, the number of offshore buyers is on the rise. There is only an 8 percent drop in the 2021 total of 47,683 when we average the first-half results from the three years before to the pandemic. First-half foreign buyer market share was 15.4%.\

 

A Catch-Up and a New Request

However, we can’t know from these numbers how many of the 47,683 foreign purchasers in the first half of 2021 were among the missing 30,000 and how many were brand new to the market as a result of those figures.. Definitely, the market is hopping. Many of the homes we’ve been compiling shortlists for have gone under contract before we’ve had a chance to show them to our clients. Because more people are entering the market at once than in a typical year, that’s what I think is the reason.

As a result of the lockdown and travel restrictions, some people are trying to make up lost time. However, if not for that, they would have been included in the 2020 data. In the first half of 2021, they appear with typical new demand. This is causing a shortage on the supply side, particularly in the resale market in high-demand areas. In addition, I believe the market is displaying indicators of higher-than-normal fresh demand at this time. We’ve heard from some purchasers who want to buy in Spain sooner rather than later. In addition, we’re seeing purchasers considering a Spanish property as a possible “work from home” location.

Notary statistics are gathered half-yearly, thus it takes a long time to acquire the full year’s numbers, as I’ve previously stated When they come out in 2022, I expect the number of international purchasers to be in the 100,000 range once again. True, second-half numbers are often lower than first-half numbers. But when travel restrictions loosen, I expect a spike in overseas purchases between June and December. Travel restrictions out of the United Kingdom to Spain were set to expire in August 2021, which means that British numbers are expected to rise considerably.

 

There is a nationality ranking system

For the first half of 2021, UK citizens were heavily banned from travelling outside of the country, yet they still managed to outpace both the Germans and French, albeit by a smaller margin than normal. The combined percentage of overseas property buyers from the UK, Germany, and France (3,738) was 26.3% in the period, not far off the market share of 29 percent for these three countries in 2020.

 

The Spanish Real Estate Market: The Influence of Foreign Buyers

Because of these numbers, foreign buyers are critical to the Spanish property market, but it’s not just about numbers. They also spend more money. In most cases, international buyers pay more per square metre than local purchasers, on average. For example, in 2020, overseas buyers spent an average of €1,777 per square metre, which is 20% more than the local average of €1,438 per square metre. So it’s heartening to see that this trend is continuing in the current data. Moreover, it appears to be speeding up. There was no doubt that prices would rise in the international property market in 2021, and now we have the evidence to back it up. All but Catalonia’s average price per square metre in the first half of 2021 grew, if we include the Balearic and Canary Islands as well as mainland Mediterranean coastlines. In contrast, in the Balearic Islands and Andalucia, it increased by 11 and 6.3 percent, respectively. In 2021, the average price per square metre paid by foreign buyers in the Balearic Islands was up 18.2% while in Andalucia, it was up 13.7%.

A large portion of the overseas market’s activity is concentrated at the upper end of the market, as evidenced by the fact that the largest increases occurred in the most costly places for foreign purchasers. Compared to 2020, the average price paid per square metre in the domestic market rose by 0.7 percent to €1,481pm2 across the mainland Mediterranean coastlines and the islands.

There is a great deal of variation in the hotspots themselves. An international buyer paid €3,607 per square metre in the Balearic Islands, €2,037 for Catalua, €1,938 for Andaluca and €1,940 for the Canary Islands in 2021. But two Mediterranean coastal regions, the Comunidad Valenciana (€1,377/m2) and Murcia (€908/m2), had a lower average than the national average:

 

The League Table for Spending

You can see this much more clearly if you look at the country of the buyer. For example, in 2021, the average cost of a square metre in Sweden was €2,768. The Danes finished in second place with €2,680, edging out the Germans, but only by a hair. Germany’s typical consumer spent €2,676.The Most Popular Destinations for International Customers

A thriving international sector is critical to the Spanish property market, according to these 2021 figures. Although this is a positive sign, it also shows that foreign purchasers have even more sway in a small number of areas. Pre-pandemic 2019, for example, the Canary Islands had a 30% foreign proportion and the Balearic Islands had a 35% foreign presence. On the mainland, the Comunidad Valenciana saw 30% of its consumers come from outside, whilst in Murcia, that percentage was 25%. These numbers much above the 19 percent of the whole international market in 2019 that had been assigned to them.

Previously, I had reported that overseas purchasers made about 15.4% of the market share in the first half of 2021. This sector is clearly important when you examine the data for Andalucia and Catalonia as well as the provinces of Castellón, Alicante and Valencia, on the mainland, as well as the Balearic and Canary Islands. In the Balearic Islands, foreign purchasers accounted for 48 percent of the whole market; in the Canary Islands, 36 percent; and in the Valencian Community, 28 percent. There was a significant amount of foreign investment in the Balearic Islands, which is unusual. It’s clear that this sector is being driven by the most affluent people in the world, since the price per square metre is the highest of any of the other hotspots.

According to statistics from 2021, about three-quarters of all foreign purchasers spent their money in these five locations, which are known as the Spanish Property Market hotspots. Because of these transactions by foreign purchasers in the first half of 2021, 34,861 (73.1 percent) happened on the Mediterranean coast or the Islands, which accounted for 12 percent of the overall property market in Spain.

 

As a result, foreign buyer market share in Andaluca and Catalonia was almost in line with national averages of 15.5 percent and 16 percent, respectively. A closer examination at the numerous autonomous regions and their respective provinces and municipalities is essential in order to understand these numbers.

 

The Property Market in Spain’s Regional Hotspots

As demand outstrips supply, certain laces are soaring in price while others remain stagnant in the marketplace.

An excellent example of this may be seen in Andalucia. Besides being the largest autonomous territory in Spain, it also has the widest range of cultures. Five of Spain’s most historic cities; Cádiz; Málaga; Seville; Granada; and Córdoba are all located in the region. Furthermore, in the first half of 2021, 22% of all Spanish property sales took place in this one location. So, in terms of real estate, it has a lot to offer, but foreign sector activity is not distributed equally. In actuality, it’s confined to a small number of places.

Andalucia’s 15.5 percent share of the overall market in the first half of 2021 was exactly in line with the 15.4 percent foreign market share of the total market. 27.5 percent of all transactions were carried out in only one province: Málaga, which translates into the Costa del Sol. On a local level, things get much more out of whack. A total of 46.1% of all transactions took place in the province’s four most populous municipalities: Málaga, Marbella, Benahavs, and Estepona. According to this, one-third of all purchases in Andalusian provinces came from a single region while half came from just four towns inside that region.

These four towns are, of course, the most costly in the province of Málaga, a further indication that the high end of the property market is most active. Andaluca’s decision to make a temporary cut in the purchase tax permanent appears to be an excellent one. Benefits are more pronounced at higher price points for all customers in the province. In this blog, I go into further detail.

And in Catalua, 48.1 percent of all purchases in the autonomous territory are made in only one province: Barcelona. Both Andalucia and Catalonia have the largest number of international purchasers in their most active provinces. Sixty-seven percent of all foreign purchasers in the Comunidad Valenciana (the Valencian area) purchase in Alicante. In the words of Mo de Fomento: )

 

Demand for Vacation Rentals and Other Travel-Related Services

It seemed like Spain’s tourist business had no end in sight prior to Covid. Another record-breaking 83.7 million international tourists made Japan the world’s second-most-visited country for the second year in a row. In 2019, tourism accounted for 14.5% of Spain’s GDP, however it was significantly greater in particular regions than the national average. When it comes to a strong tourist industry, Mediterranean areas and the islands are certain to suffer. The Balearic Islands, for example, rely on tourism for 45 percent of their GDP, making them the most reliant and vulnerable area in the country, followed by the Canary Islands, Andaluca, Murcia, the Comunidad Valenciana, and Catalonia as a region.

We should not even be discussing 2020 tourism figures at this point. Rental demand from the approximately 35 percent of foreign visitors who do not stay in hotels is a relationship between visitor numbers and the property market. While some individuals will be able to stay with family and friends or in their own houses, a significant proportion of others will have to rent privately. In addition, many Spanish citizens travelling abroad choose to stay in privately owned apartments.

It is because of this that renting out a house in Spain is a viable alternative. Even for those who don’t plan on renting out their properties. Even while not every foreign owner is also a landlord, many are. For basic maintenance and operating costs and taxes, they rely on rental income. The highest gross returns can be as high as 10% and occasionally even more for a large, top-quality detached property in a desirable location, but there are obviously many variables at play. Depending on the quality of the interior and the location, beachfront condos and townhouses may bring in anywhere from 6% to 8% gross income. As a rule of thumb, a high-quality property in a desirable location will often earn a greater short-term rental yield than a similar property that is rented long-term.

 

Demand for New Construction

When it comes to new-construction residences, overseas purchasers are like moths to a flame, even if the location is less desirable. Because the greatest places have already been built on, there is relatively little raw construction property that can be purchased. As a result, new construction is concentrated in less desirable areas.

In addition, new housing construction has trailed well behind demand since the recovery got underway. Keep in mind that the Spanish construction industry almost completely collapsed after 2008 and is currently 90% smaller than it was at its height prior to 2008. Prices for new construction were affected by this mismatch in the supply side. New construction prices, on the other hand, began to fall as the quantity of projects increased. Rumors of future stages being postponed began to circulate even before COVID-19 arrived.

Those that purchased off-plan at inflated rates before to 2020 are at the greatest risk, in my opinion. Even a minor drop in the market’s price means that their house will be worth less when they move in than they paid for it. I understand that many buyers aren’t aiming to earn a significant profit in the short term since they’ve made a long-term investment. Even before they get the keys, I’ve never met a person who was delighted with the thought of losing. Even if they own the property for a long time, some buyers may never see a return on their investment because of the inflated costs they paid for new construction. There has never been such a disparity between the cost of newly constructed homes and those for resale as there is right now.

 

Demand for a Home

In contrast, the scarcity of reasonably priced, high-quality resale houses in desirable areas makes it more difficult than ever before to make an informed purchase. In Spain’s property market, this sector is still by far the most important. Across the board, the resale-to-purchase ratio is roughly 10:1, with some regional variation. One important shift in the market is that purchasers are increasingly competing for a decent house in the appropriate location because of increased demand. When it comes to 2022, the shortage of available inventory is increasing the pressure on customers to make a purchase rather than walk away from it.

 

For houses in sought-after areas, buyers must be ready to act swiftly. An existing customer was able to purchase a house even before it went on the market in Q4 2021 because I had conducted the necessary research in advance and had received preliminary clearance for financing. There would have been a lot of interest in this magnificent beachfront property if it had been up for sale. Our client was able to get a clean path to the property since no local real estate agents were aware that it was for sale.

 

But I have an issue with the asking pricing for many items. It’s not uncommon for sellers to think that because new-construction prices have skyrocketed, they too may raise their pricing expectations. One of the largest valuation firms in Spain, Tecnocasa, found that resale asking prices on average are at least 20% more than the final price realised. Reduced asking prices from overly enthusiastic sellers are a sure sign of a successful sale. Buyers in the resale market have three options to consider if the asking price is dropped. At the onset, the product was overpriced. Second, it’s not in the greatest part of town. Thirdly, the vendor can be desperate. Instead than merely looking at the asking price, compare the prices per square metre.

 

Buying the Right Way in 2022

My advise to potential homebuyers in Spain remains unchanged. The location of a business is always the most important factor to consider. Shiny new things, whether they’re houses or apartments, coastal or rural, never beat out good location. The best advise I can provide is to start with a good location and then do the best you can with the resources you have. The rising cost of real estate is prompting some buyers to decrease their expectations for properties rather than compromise on location. That, in my opinion, is always the wisest course of action.

 

The greatest sites and quality could be had for €6,000 per square metre prior to the financial crisis of 2008. Customers were paying more per square metre even before Covid for a brand new house in a less desirable area. As much as 50% of the new-build premium has been above the resale price in some circumstances.

For many years, I worked in the Spanish real estate market, and I’ve seen numerous highs and lows. There is a huge disparity between new and secondhand pricing. My customers were able to discover numerous houses in the best areas for €3,500 – €4,500 per square metre in Q4 of 2021. It was a resale in each case, not a fresh construction. The most costly houses I found for clients in 2021 that were either brand new or recently renovated were roughly €6,500 per square foot. It’s a surprise to me why purchasers in secondary places are willing to spend more than this.

As I’ve previously stated, I believe that new-home values are more susceptible to a collapse since they were already overinflated. On the other side, a scarcity of high-quality resale houses in prominent locations is driving up prices, and I expect that trend to continue until 2022. This might be the year when the disparity between new-building and resale prices per square foot (pm2) begins to narrow.

Despite this, Spanish real estate is still reasonably priced if you shop around. The medium-term capital growth and strong rental return possibilities are both considerable. The days are long and sunny, and the people’s well-being is considered to be among the greatest on the planet. How can you dislike this?

 

It’s all about where you are.

There will always be a shortage of high-quality inventory at a reasonable price in desirable areas. In this research, I’ve proven that the majority of international buyer activity occurs in a few regions. Andalucia, Catalua, Murcia, and the Comunidad Valenciana (consisting of Castellón, Alicante, and Valencia provinces) on the mainland, as well as the Canary and Balearic Islands, are the six most popular locations for foreign purchasers in Spain. They make up 66% of the foreign market and 14% of the entire Spanish property market in normal times.

Don’t get too excited about new construction, especially if it’s not in a desirable location. Many people are not, though. Analyze comparable recent transactions and determine the price per square metre, taking into account the cost of any renovations. Afterwards, you’ll be better equipped to decide what’s most financially sensible. A lower price, a larger home, and, most importantly, a better location are all nearly assured outcomes.

 

Do not purchase any blighted goods. If it’s already noisy, it will only become worse as time goes on. If you see a mobile mast, you can bet there will be more because they tend to grow in number. In addition, electricity pylons should be avoided. In the long run, we might expect a rise in the construction of new houses. Keeping tabs on local planning concerns and potential developments is so critical. While standing motionless in certain spots, I can already count twenty cranes. You need to know exactly what can be built on the property if it is available. The selling agent’s claim that the property is in a “green zone” isn’t adequate. Why jeopardise a wonderful view?

So while analysing houses for my clients, the following questions are usually asked: Is the price adequate to allow them to sell swiftly in the event of a change in circumstances? Second, is this a property that will always be in demand, regardless of the state of the market? High-quality products in prominent places will always be in high demand. After the pandemic’s devastation, geographic position will be even more critical than it was before.

 

Conclusions

Buying / Selling Villas in Marbella Spain

How well demand held up into 2020 and early 2021 astonished me. In fact, since the outbreak of the epidemic, we’ve seen a spike in the number of people seeking our help locating a home. In all likelihood, a few prospective customers have placed their purchases on hold or given up on them completely. Contrarily, many of the folks I’ve spoken to during the numerous lockdowns have chosen to move their plans to buy in Spain forward. Nearly everyone seems to have a “let’s get this over with attitude, why wait?” mentality in the wake of the outbreak. And there’s no question in my opinion that many more individuals will be able to work from home in Spain after Covid.

Price declines akin to that saw after 2008 are widely expected in 2022, according to various inquiries. They’ll be disappointed, I’m afraid. Three factors came together from 2008 to 2013, resulting in a perfect storm. First, demand plummeted to near zero. It was gone in a flash, like if nothing had happened. At the height of the crisis, there were 1.5 million units of unsold property on the market. A credit bubble, which included 100% mortgages, was also a major factor in the surge in real estate. As a result, many purchasers during the boom were strapped for cash and could only afford to buy by taking out large loans. In my opinion, none of these circumstances exist right now.

As soon as the bubble burst and prices fell, many owners were compelled to sell their homes. As a result, many sellers had little or no equity in their home because of imprudent lending by banks with little checks on financial standing. As a result, they couldn’t afford to wait out the crisis, so they had to sell as fast as they could. As a result, the Spanish mortgage market was effectively wiped out as Spanish banks were engulfed in toxic debt and the financial industry entered full-blown catastrophe. As a result, the majority of foreign buyers in the past decade have been wealthy.

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