Foreign Buyers March On Spain Property

Spanish property market

Foreign demand for property in Spain increased by an annualised 12 per cent in the second quarter, according to the latest data from the General Council of Notaries. Foreigners now represent a record 20 per cent of home buyers in Spain, and the notaries describe them as the “principal motor of growth” for the Spanish property market.

The latest data clearly demonstrates a sustained increase in foreign demand that will have a positive impact on market segments that attract foreign buyers, such as prime locations on the coast, plus Barcelona and Madrid. Industry professionals in these areas also report improving market conditions. However, this does not mean the Spanish property market has recovered. Far from it: The overall Spanish property market and economy continues to struggle with adverse conditions.


Looking at the data in detail, the chart above illustrates how foreign demand for Spanish property has risen over the last two years, with demand for second homes/investments by non-residents increasing faster than demand for homes for foreigners living in Spain.

Second-home demand for property in Spain is now close to record highs (the red line in the chart above), and almost 40 per cent above the boom-time high. The only time this demand was higher was in the fourth quarter of 2012, when tax changes artificially boosted sales by bringing them forward from first quarter of 2013 (VAT went up from 4 per cent to 10 per cent overnight).

Foreign resident demand has collapsed since the boom turned to bust and many economic migrants who came to work on building sites have gone home. In the last two years, however, this demand has been increasing (blue line), driven mainly by Europeans moving to Spain (climate/lifestyle migrants, not economic migrants), as illustrated by the green line above.

The next chart shows how foreign demand has changed in volume terms since the first quarter of 2007, when the boom was in full swing. The yellow line shows non-resident demand, and the green line foreigners living in Spain:

spanish property market

As you can see, non-resident demand for second homes and investments is almost at a record high, and 60 per cent higher than Q1 2007, as Europeans take advantage of the Spanish property price crash to snap up bargains, whilst Golden Visa investors have also entered the market since then.

Demand from foreigners living in Spain, on the other hand, has collapsed by almost 60 per cent since Q1 2007, mainly because the economic crisis has sent economic migrants packing.


How did foreign demand breakdown by nationality in the second quarter of this year?

Spanish property market

Foreign demand for property in Spain broken down by nationality Q2 2014

The British are still the biggest group of foreign buyers, with 16.7 per cent of the market, but they no longer dominate as they did in the boom, when they were closer to 30 per cent of the foreign market, and 75 per cent of the second-home market. The market today is much more diversified than it was in the boom, which is positive news for Spain.

Focusing just on demand from the main markets, the British lead with a 25 per cent share of the market, whilst the Chinese are at the other end of the scale with 6 per cent market share. The way Chinese demand is growing it’s likely the Chinese will move up the ranking in the next couple of years.

Foreign demand for property in Spain by nationality, key markets only Q2 2014

Foreign demand for property in Spain by nationality, key markets only Q2 2014

How has foreign demand changed over the last two years? Which nationalities have a growing appetite for Spanish property, and which appear to have had enough?

spanish property market foreign demand

The blue columns show how demand has changed over one year, and the red columns over two years, for a selection of foreign markets, plus the total for foreign demand.

There has been strong growth in demand growth from key markets like the UK over the last two years, up 43 per cent in one year and 75 per cent in two years. There has been strong growth from Ireland, the US, China, the UK, Italy, Switzerland, and other EU countries. Total foreign demand is up 12 per cent in one year, and 37 per cent in two years. But in the last 12 months there has been almost no growth from Germany and Norway, whilst Belgian demand is down 1 per cent, Russian down 3 per cent, and other non-EU demand 20 per cent.

So foreign demand is growing strongly, but not across all markets. What is driving the changes in demand? Likely lower prices and Spain’s investment and lifestyle proposition is attracting European buyers, whilst the “Spanish Golden Visa” scheme offering residency permits to Non-EU investors who spend €500,000 or more on Spanish property is attracting more Chinese buyers. Russian buyers are down because of the weaker ruble, which is also linked to the problems in Ukraine. The decline in other non-EU demand shows what a failure the Golden Visa scheme has been due to flaws in its design.

It’s difficult to explain why German, Norwegian and Belgian demand is stagnant or falling. If anyone has any suggestions why these nationalities are bucking the European trend of rising demand for Spanish property, please share them in the comments section below. German buyers are notoriously quality-conscious, and it could be that they just can’t find the quality thew want in Spain. Much of the Spanish housing stock for sale today was built in the boom, when standards fell and prices exploded.


Spain is a popular holiday and retirement destination (that has not yet fulfilled its potential to become the California or Florida of Europe), and one of the biggest economies in Europe, so it attracts both foreigner buyers moving to Spain, and non-residents looking for a second-home or investment. The following chart shows how demand breaks down by residential status and nationality for a selection of key markets.

spanish property market sales q1 2014

As expected, the majority of European buyers are non-residents purchasing second homes, though it is noteworthy that almost a third of British, French and German buyers are resident in Spain. This is a little surprising given the perplexing way Spain is using fiscal obstacles to discourage Europeans from moving to Spain just when it should be rolling out the red carpet.

The large proportion of Italian residents buying in Spain are really Argentine immigrants with Italian passports.

The large proportion of Chinese residents buying are economic migrants, and the small share of non-resident buyers are Golden Visa investors. That share will increase in the coming years. If the Spanish Government sorts of the flaws in the Golden Visa scheme, that share could explode (but don’t hold your breath).


Where are foreign investors buying property in Spain?

Foreign demand for property by Spanish  region Q2 2014

Foreign demand by Spanish region Q2 2014

The Valencian Community, home to the North Costa Blanca and South Costa Blanca, gets the lion’s share, with 31 per cent, followed by Andalucia, home to the Costa del Sol, Costa Tropical, Costa de Almeria and Costa de la Luz, with 21 per cent, Catalonia, home to Barcelona, the Costa Brava and the Costa Dorada, with 17 per cent, and the Canaries with 11 per cent. This just goes to show that it’s Spain’s holiday infrastructure and appeal that helps drive foreign demand for property in Spain. More than 75 per cent of foreign demand is concentrated in just four Spanish regions.

The following map shows the importance of foreign demand in different regions:

Foreign demand spanish property as market share per region Q2 2014

Foreign demand as market share per region Q2 2014

Foreign buyers are 43 per cent of the market in the Canaries, 42 per cent in the Balearics (predominantly Mallorca and Ibiza), and almost 40 per cent in the Valencian Community. These regions are highly dependent on foreign buyers. This is a blessing whilst local demand remains depressed, but foreign demand is fickle and can evaporate at the first sign of trouble. After all, nobody needs a second home in Spain.

Now let’s look at foreign demand by key region, broken down by volume and average budgets in Euro per square metre (€/m2).

spanish property market by region and budgets

The blue columns show the sales per region (left hand axis), and the red columns show the average spend by foreign buyers in €/m2 per region.

The Valencian Region has the highest number of sales (5,661) but one of the lowest levels of spend (1,186 €/m2), which is what you would expect of the Costa Blanca South – a mass-market destination with high volume and low prices. It is a cheap destination that attracts lots of foreign buyers with small budgets.

If you assume an average property size of 100m2, then the foreign buyer market in the Valencian Region in Q2 was worth 671 million Euro.

The Balearics are a different story with relatively low sales volumes (983) but high value (€2,495 €/m2). The market value in Q2 was around €245 million.

The Balearics attract affluent buyers probably more interested in quality than simply cheap prices.


Who’s buying the cheap property in the South Costa Blanca? The next chart will help answer that question:

spanish property foreign buyer budgets

This chart illustrates foreign buyer budgets broken down by nationality and residency status. Residents buyers are represented by the blue columns, and non-resident second-home buyers in red.

This chart clearly shows the difference between Golden Visa demand, ‘quality conscious’ European demand, and the nationalities looking to bag a bargain in Spain.

Non-resident Chinese and ‘Other Non-EU’ (ONE) buyers are Golden Visa investors, and they pay the highest price (2,155 €/m2). Mistakenly, in my opinion, they are more focused on the visa than the property investment, and they don’t have time to shop around, so they pay more than others (overpay). Resident Chinese and ONE buyers, on the other hand, are economic migrants with low budget only beaten on the down side by ‘Other EU’ and the Dutch.

German second-home buyers (concentrated in the Balearics and Canaries) and other quality-conscious northern European buyers like the Swiss and the Danes, tend to have higher budgets whatever their residential status, whilst Europeans like the French and British are mainly price driven, whatever their residential status

This chart suggest the rumour that the Dutch are cheapskates is true, and I will enjoying teasing my Dutch friends with it.

Finally, a look at how much foreign buyers are spending today compared to the boom years.

foreign buyer budgets in spain

Foreign buyer budgets €/m2: Residents (red) Non-residents (green)

This chart shows the spending of foreign buyers today compared to first quarter of 2007, towards the blowout phase of the boom. Foreign buyers are now spending around 25 per cent less than they did in Q1 2007, and more like 40 per cent less than they did at the peak in 2008.


Will foreign buyers bail out the Spanish property market? The answer is probably not. Much of the excess inventory currently plaguing the market is in the wrong place to appeal to foreign buyers.

Foreign buyers will, however, give a significant boost to the segments they shop in. This has implications for foreigners wishing to buy or sell property in Spain. The scene is set for some sort of recovery in those segments where foreigners buy, assuming the macroeconomic situation in Europe doesn’t take a turn for the worse.



8 thoughts on “Foreign Buyers March On Spain Property”

  1. Renee

    If Spain is looking for foreign buyers, why is it so difficult to meet all the requirements? We made an offer in May, and keep coming up against road blocks. The latest is that we must be “members” of the bank selling the property, and we need to be in Spain to become members!

  2. Kathy Birtwistle

    the german market could have fallen due to the german government changing the tax break on second properties. the norwegians have probably reached saturation point…

  3. Hans Verver

    Thanks much for interesting and thorough review Mark!
    The Dutch are by many certainly being considered a bit “scroogy” but since surely they love Spain, they probably fell back as a consequence of deepened fiscal measures in The Netherlands following the prolonged financial crisis, steeper unemployment, considerably higher overall cost of living, including the tightening of a.o. fiscal deductibles for first home real estate,
    such combined measures evaporating spending power for luxury items such as second homes (which became apparent not only in Spain, but also other countries they love for second homes).
    Meantime, with best regards, Hans Verver

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