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%).
Thoughts on “Foreign buyers in the ascendancy”
Given that ‘Foreign Buyers’ are all those shown on the chart, that is to say non-Spanish nationals, why aren’t the Spanish in the ascendancy after all it’s their country? Maybe only in Spain could such a phenomenon occur, most countries would show their own nationals in the ‘ascendancy’.
So, again, why aren’t the Spanish in the ascendancy, are they too poor, too distrustful of their own market, not prepared to accept the hype that ‘foreigners’ are fed all the time, do they know something that foreigners don’t, what is it?
matt coman says:
The Spanish system is very different here Phil. For example, homeowners own a lot of negative equity and therefore cannot move. Thats if they haven’t had there home repossessed already :
“The pre-crash bubble saw Spaniards borrow merrily, owing almost twice as much in mortgages as Italians by 2010. The total debt is falling gradually, but is still around €600 billion ($780 billion). Some 8% of mortgage-holders are now jobless. Last year 80 families a day had mortgages foreclosed, with their properties usually valued far below the purchase price. Many owe money on homes they no longer own or live in” (The Economist).
In Spain if you loose your home you take your debt with you for life ! You cannot declare bankruptcy. The property bubble here was massive and of course they are very distrustful of the market. And remember the 27% unemployment figure.
Also, remember that many of the purchases in Spain by foreigners are for relatively cheap purchases and many cash buyers. We are still a long way from a significant number of foreign purchases and those that are buying don’t reflect the average market
Yes, that it is, sadly the Spanish people, we are in Spain without a job or out of the country with a job plus the morgage. The bank came to us in the “happy years” and offer a “nice” mortgage. We were living in a rented flat and we saw the opportunity to buy our own flat. We were working both of us as self-employed, my husband more than 10 years as architectural technician, me as executive administrative and in 2010, in 4/5 months, no clients, invoices unpaid, no money, no benefits, nothing. From 2012 we are out of our country, have manage to rent our flat, my husband is kitchen porter and thanks god for this opportunity! For one hand, we are trying very hard to have always our flat rented because if you do not pay the morgage in 3 months,,,,,, you can loose your home as the process begins. For the other hand we are trying to sell it and forget the mortgage for ever. This is our situation and I strongly believe, we are not alone.