Buying a property in Spain – this is a dream for many people, being able to jet off to the sun during our breaks. But how easy or hard has it been and what does the Spanish property market look like this year for homebuyers and investors?
The Spanish Property Market
Demand from international buyers is still a fundamental part in boosting the property market in Spain. Undoubtedly, the Spanish Property market is in a recovery phase and has been throughout 2016 and 2015. In particular, 2016 was a year that enjoyed steady growth and an encouraging transaction rate. Housing demands continue to rise, financial banking is becoming cheaper and the price of land is increasing. This leaves the official ending of the housing crash – in 2014 – a thing of the past.
We estimate that this year will be a key turning point for the Spanish property market. The main differences noticed during the 2016 recovery phase was that price increases have not just been limited to Barcelona and Madrid but the economy as a whole is growing. There are lower financing costs and good potential for rental returns and capital appreciation, which will continue to heighten sales throughout 2017…and beyond.
It is important to note that Brexit had a noticeable effect on the sales of Spanish property in the second half of 2016, due to the depreciation of the Pound. However, despite this change, Brits are still dominating the foreign sales with almost a fifth of the market share (double that of French buyers). For a lot of people, high-end homes in the UK are becoming a historical thought and we expect to see the same trend among Middle East citizens and US.
Despite Spain’s stubbornly high unemployment rate, restricted credit and a period of almost no government, the Spanish property market has flourished. UK buyer numbers are unlikely to drop because of Brexit and it has been predicted that the places that will attract most interest this year include Alicante, Almeria, Tenerife and Ibiza.
Bankinter estimates that houses in Spain will only continue to rise in value, by approximately 5%, which is good news for Spanish property…so now is a great time to buy or invest. The price of housing will modestly rise throughout the whole of Spain, despite the increase slowing down during the first few months of 2016.
However, the financial institution (Bankinter) assures that housing increase will be limited in 2017 due to two reasons:
- Selling of houses at discounts – a lot of assets are becoming commercialised, which will be a factor of pressure to decrease the average price in selling and buying property.
- The financial effort out of investing in property – buying a house demands setting aside 6.4 years of household income kept by the large propensity of the Spanish people for buying rather than renting.
Despite the predicted limits this year, Bankinter reassures that the price of housing will increase due to:
- The increase in the price of land: the prices of urban land in Spain picked up to 5.2%, on an inter-annual rate from the first quarter of this year and have increased in 5 of the last 6 quarters.
- Limited offer on new homes – there are so many unfinished houses throughout Spain that it has now made the built ones increase in value as demand rises.
- Rent prices are on the rise – rental payments have increased in Spain by 5.8% (during the second quarter of 2016).
- Strong price-rise in the larger cities and the most touristic areas – the cost of houses in Madrid and Barcelona are increasing at a quick speed, with an average annual increase of 5.1% and 8.2%. As these two cities are leading in price increases, there is a positive aftermath in expanding towards other significant cities on the outskirts. This is having an encouraging effect on buyers.
Bankinter also highlights: “as the overnight staying in private tourist apartments and flats increase, the prices of more requested areas will rise due to the additional profitability that this tourist renting provides.”
The residential market is securing the road towards recovery that initially began in 2014, it then slowly crept up in 2015 and 2016 and will continue to in 2017. According to the General Council of Notaries, housing sales have increased by 16.8% over the last year, which shows that prices are keeping a comforting upward tendency.
Here are some interesting facts and figures from 2016:
– The house price index came in at 70.476, which over the year made it a 4.02 increase%;
– There were 102,216 total house sales across the whole of Spain, making it a 8.70% increase;
– There was an increase in domestic mortgage approvals, 32,774 in total, which made it a 12.67% increase;
– The percentage of international buyers came in at 18.44%, which was a 0.03% decrease from the year before.
So now let’s look at an overall summary of the housing market forecast for 2017:
– All of the evidence suggests that the worst is inevitably behind us – great news! The recovery will continue to increase but it may be gradual, so we do have to be patient.
– As a prediction, the average price rise is from +2.3%, in 2016 to +5% in 2018, according to R.R. Acuna & Asociados consultants.
– Banks may start charging for services that have been previously free to date and commissions are set to go up.
– There will be 425,000 to 450,000 new mortgage signings – an increase of 5% to 10%.
– Mortgage rates will rise in the short term, as banks will charge higher spreads to cover costs.
– The prediction for this year is that there will be 75,000 to 80,000 more planning approvals, making it an increase of 20%.
So overall, the Spanish property market is in a good place and this year it will only get better. There appears to be a lack of drama and fear and much more reassurance. People have been buying and selling houses and the percentages have only increased over the years, since 2014. This is a remarkable thing despite the Spanish economy remaining weak, which if this was the case for many other markets, this would be drastically different. Buyers are still attracted to Spain, and no wonder why, it is a beautiful country with a beautiful abundance of potential.
Written by Gemma Smith