The luxury end of the Spanish property market is performing better than the squeezed middle-market, where the lack of financing and the economic crisis are biting into demand.
Houses with price tags over a million Euros that tick all the right boxes (location, design, quality) are selling relatively easily in today’s market, according to Fernando Encinar, the head of research idealista.com, a spanish property portal. The top end of the market is providing a rare positive news story in Spain’s crisis hit real estate sector.
Encinar says that the luxury market can be split into two segments: coastal properties, and those located in the Spanish interior, including cities like Madrid.
Buyers in the high-end coastal market are often Russian or Scandinavian, plus a growing number of wealthy Moroccans buying on the Costa del Sol out of fear that the Arab Spring is on its way.
Luxury property in the interior appeals more to wealthy locals and businessmen seeking discretion, privacy, and good access without any need of refurbishment. These buyers are not attracted by the ostentation and glitz on the coast. The same applies to property for sale in Barcelona.
As global elites get richer, the high-end in Spain is recovering faster than the middle-market, where squeezed middle-class buyers can’t get financing. But high-end buyers still expect discounts if they are to part with their cash, says Encinar, and price reductions of 50pc are possible. Wealthy buyers are negotiating hard, and using the fact that luxury properties have high running costs to push the price down.
The strength of the luxury property sector is not unique to Spain; the top end of the market seems to have detached from the rest of the market in several countries since the crisis began, including Britain. The rich are cash-buyers, which gives them a particularly strong hand at a time like this. The crisis has hit the middle of the market much harder due to mortgage credit drying up and the squeeze on employment and wages.
The relative size of the markets are also important, the glut of unsold properties is not nearly as acute at the top end of the market as it is for homes worth under a million.
We are now seeing a two speed market emerging in Spain, with both the high-end and deeply-discounted cheap homes selling well, whilst the middle market stagnates.