Note: this post was published on 15/05/2020 - We are living in uncertain times. Several people therefore ask Confianz what the Spanish property market will do after the corona crisis. We too cannot predict the future, but with this post we will discuss some of the factors that we believe could impact the property market in Spain.
A brief overview of the Spanish property market
First of all, there is no such thing as "the Spanish property market". The real estate market in Spain is highly fragmented. On the one hand, there is the domestic housing market for Spaniards and residents. The purchasing power of Spaniards was already under pressure because of the increased real estate prices. By corona - an economic tragedy for many Spaniards - this will not improve. The market for second homes (Spaniards buying holiday homes in their own country) will also be under pressure. With price drops as a result.
On the other hand, there is the international market: non-Spaniards buying holiday homes in Spain. Here we need to distinguish between re-sales and new construction projects. Market dynamics are also highly dependent on the region. The market in Ibiza looks completely different from the Costa Blanca market, for example.
Factor 1. The economic impact of corona
“Morir de hambre o por el coronavirus." Die of starvation or die of coronavirus. As cited above, many Spaniards are facing financial difficulties due to the economic impact of the coronavirus. This will be no different in other countries.
This may put pressure on the Spanish domestic market. But undoubtedly, more foreigners will also put their Spanish second homes up for sale. Prices of mainly resale properties will fall as a result.
Factor 2. Interest in Spanish property
Currently, the international market is at a standstill. Almost no new sales are taking place. However, both in our own practice and with various estate agents, we do not notice a decline in interest in Spanish property. On the contrary, we see an increase in requests from people with (emigration) plans. Our clients - mainly Belgians and Dutch - who are already in the buying process are also hoping to complete the transaction quickly.
Of course, as long as people cannot travel to Spain in person, there will only be a limited number of new sales. This will have a temporary impact on new-build properties. Promoters will offer projects for sale cheaper or on more favourable terms. However, the drop in prices will be limited because - unlike private re-sellers - they have less margin to reduce prices.
But once the travel restrictions are lifted, we expect a quick revival in sales to foreigners, both in re-sales and new construction projects. Retired and wealthy buyers from Belgium, the Netherlands, Britain, Germany, Switzerland, etc. will be less affected financially by the economic consequences of the corona crisis. Moreover, interest rates will also remain low for a long time, which is a reason to invest in real estate.
Factor 3. Brexit
The Brexit is creating a lot of uncertainty for now. Many Britons - the largest foreign market - will try to sell their Spanish property. Also, as non-EU nationals, they may face more obstacles to buying in the future. This will mainly impact resales.
Nevertheless, Britons will also continue to buy. After all, Spain remains one of the most pleasant and affordable destinations in Europe and has the infrastructure to accommodate second home buyers.
Factor 4. Social distancing
Let's face it: social distancing does not make life more pleasant. We mainly think of hotels. In the worst case scenario, public areas of hotels will remain closed. In a more realistic scenario, the capacity of hotels will be drastically reduced. Possibly, we will have to make reservations to lie by the pool.
Therefore, because of the impact of social distancing, we suspect that more people will rent second homes instead of going to hotels. These rentals will be driven by strict holiday rental legislation in some regions are necessarily seasonal rentals. In itself an argument for investing in a second residence yourself.
Factor 5. Travel options
The question is how we will travel abroad. Will many people still dare to fly? Will we go on holiday by car more? Maybe more people will go on holiday by mobile home? Will air ticket prices rise? The method of travel and its cost will have a big impact on the Spanish property market.
Conclusion: property market in Spain after Corona
We think mainly resales will suffer. And especially properties located in less touristy or less well-known regions. For high-quality properties, there may not be much change, but we think there will be opportunities in the short term. In the long term, we expect opportunities for people with emigration plans who do not necessarily want to settle in tourist regions.