Yesterday I moderated a panel discussion at the SIMA real estate fair in Madrid analysing the foreign market for second-homes in Spain, and the impact of Brexit. On the panel were leading players in the industry, who explained how buyers from other nationalities are stepping in to take the place of reduced British demand post-Brexit
Along with Barcelona Meeting Point (BMP), the SIMA fair in Madrid is one of the largest and most influential real estate events in Spain. Key industry players attend the professional conferences, and the public stands are once again drawing big crowds. These two events are good indicators of activity in the Spanish property market, and having participated this year in two panels at BMP (one on marketing, and one on foreign demand) and moderated one yesterday at SIMA (on foreign demand and Brexit), I can say that confidence is the highest I have seen it since the boom years.
Top-Tier Industry Panel
On the panel with me yesterday were Ángeles Serna, President of the property developer TM Real Estate Group (TM), Consuelo Villanueva de la Sierra, a Director of ST Sociedad de Tasación (ST) – an appraisal company – and Marc Pritchard, Sales & Marketing Director at developer Taylor Wimpey España (TWE). This was a professional conference exclusively for industry insiders.
ST have just published a detailed report on housing inventories on the coast, so Consuelo came armed with all the latest data on that question, whilst Ángeles and Marc both have more than twenty years experience developing and selling homes to foreign buyers on the Spanish coast and islands. TM Real Estate Group – a family firm started almost 50 years ago – and Taylor Wimpey España – the Spanish arm of UK house builder Taylor Wimpey Plc – are two leading developers of holiday-homes in Spain. Everyone on this panel knew what they were talking about.
After a presentation by Consuelo explaining housing inventory levels on the the main Spanish coasts, showing how the glut left over from the boom has largely gone leaving a residual stock of bin-ends that might never sell, our attention turned to foreign demand and the impact of Brexit.
I kicked off the discussion with a summary of the latest statistics illustrating how British demand has contracted by almost a quarter since Brexit. As house-builders Ángeles and Marc confirmed a noticeable drop in UK demand since Brexit, though in both cases British buyers are still an important part of the mix. In the case of TWE, British buyers went from first to sixth place after Brexit, but have recently moved up one place to fifth in terms of sales.
Marc made the point that British interest in buying property in Spain has not changed much – TWE are still getting good levels of enquiries and visits from the UK – but what has changed is the commitment to buy, with many more potential buyers deciding to delay their decision. “British leads and visits to our show homes are only slightly lower compared to the previous year,” he said. “Exchange rate and Brexit uncertainty is stopping these clients from taking a final decision.”
What became apparent from the discussion was that buyers from an ever increasing number of other nationalities have quickly stepped in to take the place of the 25% of British buyers who have dropped out of the market. TWE has now dealt with buyers from 34 different countries, and TM have also seen growing demand from countries like Belgium and Sweden. That helps explain why total foreign demand in the first quarter of this year was up 16% in Q1 despite a 24% decline in British demand.
Why is foreign demand growing at such a clip? Because, as a lifestyle and investment destination, Spain ticks all the boxes whilst the competition gets weaker. Spain offers attractive property prices, a good variety of homes and regions to choose from, a great climate, a strong democracy, personal safety, outstanding health-care, lovely beaches, intoxifying culture, excellent infrastructure, and stability in both Schengen and the Eurozone. Few other countries can compete with this package. Indeed, former competitors like Turkey and Egypt are now a growing source of demand for property in Spain, as their affluent citizens get nervous about the situation back home.
With growing demand from other nationalities, developers like TM and TWE have shrugged off the negative impact of Brexit, though, of course, sales would be even better if Brexit had not happened. Ángeles, who has seen more than one crisis come and go, was more concerned by the time it takes to get planning permission for new developments in regions like Andalusia and the Balearics, than a temporary decline in British demand due to Brexit.