Spanish property may be getting cheaper, but foreign investors are still staying away in large numbers. That’s the conclusion I draw from the latest figures from the Bank of Spain.
Even so, I’d rather be trying to sell Spanish property to foreign investors than foreign property to Spanish ones. At least there are still some buyers for property in Spain, if the price is right. Spanish investment in foreign property, on the other hand, has totally collapsed.
The latest figures from the Bank of Spain on cross border real estate investment reveal that foreigners invested 860 million Euros in Spanish property during the second quarter of the year, down 40% on the same period last year. The Bank of Spain’s figures include all real estate investment, not just residential investors.
Look further back, and the picture is even more demoralising. Foreign investment was down 55% compared to the second quarter of 2004, the heyday of the Spanish property boom, when the rest of the world ploughed 1.9 billion Euros into Spanish real estate assets. It is now back to levels last seen in the first quarter of 2000, when it stood at 777 million Euros. The appetite of foreign investors for Spanish property has been declining since the start of 2008, after staging a minor rally in 2007.
Spanish investors flee foreign real estate markets
Estate agents and developers in Spain may be feeling sorry for themselves in the current market, but they can thank their lucky stars if they aren’t trying to sell property abroad to Spanish investors, who have completely thrown in the towel.
According to the Bank of Spain, they invested just 1.1 million Euros in foreign real estate assets during the second quarter, down around 99% from 548 million a year before. Back in Q2 2007, when Spanish investors were feeling flush with cash from their own property boom, they invested 925 million Euros in property elsewhere. In comparison, the latest quarter was a complete collapse.
How does one explain this? My guess it is has something to do with the financial problems of Spain’s developers. At the height of the boom many of them set about international expansion, snapping up land and buildings in Eastern Europe, Latin America, and North Africa. Now they are hoarding their resources and trying to keep their heads above water.
One thought on “Foreign investors still shunning Spanish real estate”
Perhaps surprisingly, a number of estate agents are noting that there are many individual Spanish buyers of properties in Costa Del Sol. The Spanish see that the market has been abandoned by UK buyers due to the poor strength of the pound. Also, Sterling sellers can sell at 20% below what the property was marketed at a year ago and still end up with the same amount of Sterling to take back the UK with them.
Also, don’t forget the stock of B-money, which will come out at this time for cash purchases. It will also support the economy for sometime, although it is foreseen that the recession will be sufficiently long in Spain as to draw out most of this ‘resource’. Perhaps that is the Bank of Spain’s cunning plan to remove the alternative economy. Unfortunately, the raising of taxes will just encourage it even more.