Foreign buyers taking advantage of Spain’s house price crash are helping to bring the market contraction to an end in popular coastal areas.
The Spanish property market shrank 0.5% last year in volume terms (sales), according to the latest data from the property register. Had it not been for the growing number of foreign buyers bargain-hunting in Spain, I estimate the overall market might have contracted by 3% or more.
Foreigners bought 36,226 residential properties here last year (see table above), up 35% on the previous year, and up 82% on 2010. Local demand, in contrast, fell 4% last year, and 31% since 2010. Foreign demand has been the only source of good news for the Spanish property market in the last four years.
With foreign demand increasing whilst local demand slumps, foreigners have grown to represent 12.85% of the market in Q4 last year, or 11% taking the year as a whole, up from a low of 4.24% in 2009. Foreign demand is now more important than ever to the Spanish property market.
Foreigners tend to be cash-buyers from European countries with stronger economies but miserable climates. They don’t need mortgages, and are well placed to take advantage of house prices down around 50% from the peak.
2013 was the best year since 2007 for real estate “exports”, when foreigners bought 69,450 homes in Spain. That said, we are still a long way from the record 82,000 properties sold to foreign buyers in 2006 (22,617 to British buyers alone that year).
Sales to foreign buyers were up robustly in all key markets last year with the exception of China, where sales fell 3%.
The biggest percentage increases came from Finland, up 90%, followed by Sweden (+65%) Belgium (+52%), and Denmark (+37%). It seems the Scandinavians are taking full advantage of the crash in Spanish property prices to buy Mediterranean real estate at bottom-of-the-market prices.
Foreign demand is also much more diversified than it was during the boom, and far less dependent on British buyers, who have fallen from 30% of foreign demand in 2006, to 15% last year. Foreign buyers now comes from significantly more countries than before, as you can see from the following pies (click to expand).
Chasing the Dragon
Chinese buyers bucked the trend and declined by 2.6% last year, despite industry expectations of increased demand from China in response to the new “Golden Visa” residency permits for non-EU nationals investing in Spanish property. It’s possible the new Golden Visa law, introduced at the end of September 2013, hasn’t had time to have an impact on the official figures. The first residency investors are only just starting to get their visas. Early signs suggest that Chinese demand for Spanish property will be strong this year, especially in Barcelona and Madrid.
On the road to price stability
Average Spanish house prices fell 1.25% in 2013, but rose 2.16% over three months to the end of the year, according to the figures from the property register. Official house price data is notoriously unreliable in Spain, but if there is any truth to these numbers foreign buyers can take much of the credit for bringing the decline in house prices to a close.
Sales up on the coast
The market shrank another year running, but last year it was just half a percent (-0.48%), suggesting the 6-year market contraction is drawing to a close. New build sales fell 8%, but resales rose by 7%.
There were big differences between local markets, however, and sales increased in almost all the provinces with popular coasts that attract buyers from abroad.
In Málaga province, home to the Costa del Sol, sales increased 8.5% to 20,085, with new build sales up 2.5pc and resales up 15pc. Partly thanks to foreign buyers, Málaga and Alicante are now the biggest property markets in Spain after Madrid and Barcelona.
Sales also increased in Las Palmas (+17.25%), Alicante (+11.67%), Barcelona (+10.36%), Almeria (+9.23%), Murcia (+6.49%), Girona (+2.88%), Tenerife (+2.41%), and Tarragona (+1.93%), but fell in the Balearics (-2.77%).