Market sends mixed signals as the downturn loses steam

After years of nothing but bad news from the Spanish property market, we are now entering a period of mixed signals as the downturn loses steam, but a recovery has yet to take shape.

spanish-property-market-mixed-signalsOn the one hand, there are clearly signs of improvement. For example, the number of foreigners buying property in Spain surged last year, rising to more than 12% of the market in Q4, according to data from the property register. “The purchase of homes by foreigners continues to grow quarter after quarter, representing one of the most dynamic factors in the Spanish property market today,” says the latest report from the property registrars.

Growing foreign demand is particularly positive for the Costa del Sol, as a popular holiday destination that attracts foreign buyers. There is also anecdotal evidence that all-important British buyers are coming back in greater numbers, buoyed by a stronger economy and better exchange rate, with the Pound above 1.20 Euros for most of this year

Smaller price declines

There are also signs that house price declines are on the wane. The official House Price Index for the third quarter of last year, published by the National Institute of Statistics based on figures from the Notaries, showed the first quarterly price increase in three years, though it had to be taken with a pinch of salt with sales at such a low levels.

Another sign of shrinking price declines is the 2013 asking price data from, a property portal. Last year there were fewer regions with declines of 10pc or more, and prices even rose in some municipalities and city districts. Price falls in Malaga province were the second lowest in Spain, whilst prices were just 2.8% down in Marbella and rose in Estepona (+2%) and Manila (+11%). Overall, the average price of housing in Spain declined 8.5pc last year, to 1,730 €/m2, compared to a decline of 10.5pc in 2012.

Home sales still falling

But it’s still way too early to celebrate the end of the crash, and there is plenty of bad news to remind us of that. Home sales fell by -22% last November, new build sales by -60%, house prices by -10.2%, and mortgage lending by -30%, according to recent figures from the Notaries, though these dire figures can partly be explained by fiscal changes that distorted the market.

With unemployment still high, the housing glut still monumental in places, and mortgage lending still hard to get, the Spanish property market is not going to recover with any speed. But when the recovery does take shape, it’s a safe bet it will be led by bellwethers like Marbella and prime parts of Barcelona and Madrid.

My hunch is that prime property prices won’t go any lower, and we have reached the best time in the property market cycle to invest in prime Spanish property, as the downturn loses momentum, but the recovery has yet to take shape. However, absurdly high transaction costs in some areas are a serious problem for investors, and could wipe out potential gains from capital appreciation for several years.

SPI Member Comments

Thoughts on “Market sends mixed signals as the downturn loses steam

  • History tells us that property prices always recover and cycles are usually every ten years. This recession being an unprecedented one is the reason for the cycle being slightly longer but within the next couple of years we´ll see prices climbing back to 2007 prices and will then probably go past them at some pace towards the next ´bubble´. Now is the perfect time to buy but established areas are the ones to look for.

    • Oh really? ‘History tells us’ hm don’t believe you can quote ‘history’ with Spain’s unprecedented property slump, there’s nothing to compare with the property crash in Spain, such as complete oversupply of poor build and often illegal builds. Now is not the time to buy for UK citizens in Spain, exchange rate is very unfavourable still.

  • Why is now not the right time, Phil, if you want a bargain property in the sunny Costa del Sol? Prices are incredibly low, bargains from distressed sellers abound, and at £1 = €1.20, that’s the BEST it’s been for years!
    Just make sure you buy a legal property, and check the build quality yourself. Investment returns of 5% and more can be made in simply renting it out for now, and even you must concede that capital gains over the mid-term are looking very rosy indeed. So what is the big problem that would stop a would be, careful buyer, in his tracks?

    • The big problem for Brits is the exchange rate used to be 1.65, they’d be lucky to get 1.20 now a fall of over 25%, (you call that BEST for years but it’s still a rubbish rate) so take that off the fall in prices and not the bargain portrayed. Many of the bargains from distressed sellers are poor build quality and in noisy urbanisations or stuck up a mountain, says it all with over 3 million empty homes in Spain, buying now is not a good investment, maybe holiday home if Brits have that cash available. Many of these so called bargains are from Banks, who give high LTV mortgages but have bumped the price up compared to same properties on agents’ books. Spanish property is a b—-y minefield to negotiate all the hype and bull.

      But then why bother with a cheap holiday home when you can visit different areas and hotels without the hassle of ownership abroad? No I don’t concede that ‘capital gains over the mid-term are looking very rosy indeed’ what nonsense, don’t forget you need to factor in another 17-20% for transaction costs, eating up any capital gain for years?

  • Do potential UK purchasers need to consider the implications of the UK opting out of EU. Does anybody know what the implications of this are likely to be, if any?

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