Foreign demand for property in Spain rose 11.6% in the third quarter of the year, driven by global buyers compensating for lower British and Scandinavian interest, according to data from the latest housing market report from the Association of Spanish Registrars.

15,312 home sales deeds involving a foreign buyer were inscribed in the Spanish land register in the third quarter of the year (see chart above), up 11.6% compared to the same period last year, but down 1.8% compared to Q2 of this year. As a result, foreign buyers are now 12.9% of the Spanish housing market (see next chart), down from 13.3% a year ago, simply because local demand is now growing faster than foreign demand.

Foreign demand for Spanish property by nationality

Demand for Spanish property today is global, but just eight countries (excluding Romania and Morocco, which would be the 7th and 9th respectively, if not excluded) contribute 56% of buyers, led by the British as always, with 2,252 purchases recorded in the period (15% of foreign demand), followed by the French (1,299 transactions, 8% of foreign demand), and Germans (1,192 sales, 8% of foreign demand). Outside the big eight markets, the rest of the world (including Romania and Morocco) delivered 6,744 buyers in the period, 44% of total foreign demand.

How is foreign demand for property in Spain changing?

Overall, foreign demand for homes in Spain increased by 11.6% in Q3 compared to the same period last year.

Looking at the change in demand per country (next chart below), we see strong demand up more than 20% from Romania, China, Holland, Ukraine and the ‘rest of the world’, and a big increase of almost 20% in demand from Germany – the third biggest market and on course to overtake France in the number two spot at this rate. There was robust growth of 15.6% in Russian demand after several years of big declines, and reasonable growth of almost 6% from France, the second biggest market today. At the other end of the scale, British buyers continue to decline in the wake of Brexit, whist Sweden and Denmark both fell by 7.5%. The overall picture, however, is another quarter of growing global demand for homes in Spain.

Now let’s compare the evolution of demand from the three biggest markets, namely the UK, France, and Germany. You can see how the British market took off at the start of 2015 before falling back after the Brexit vote, and then recovering somewhat in 2017, leaving it still as big as France and Germany combined (almost). Brexit or not, Spanish property is a firm favourite with British investors.

How is British demand for property in Spain changing?

As the biggest foreign market for Spanish homes by a wide margin, it’s worth looking at British demand on its own. How and why is this market changing?

British demand for property in Spain was on fire after the crash ended in 2012-2013.  UK investors were attracted to Spanish property by low prices and rising confidence, with demand growth close to 50% or more in many quarters between the start of 2014 and the beginning of 2016.

However, after the Brexit vote in June 2016, British demand declined significantly, but only for a few quarters. And as you can see from the chart above, it looks like British demand will return to positive growth in the next quarter or two. It looks like Brexit was just a temporary set-back.

What is driving the change in British demand? More than anything, in my opinion, the Pound-Euro exchange rate that determines British spending power in Spain. As you can see from this final chart, British demand for property in Spain lags the exchange rate by a couple of quarters.

However, I’ve also heard reports of a recent flood of enquiries from British clients looking to escape Brexit Britain and the hard-left Government that looks likely to control it. Interesting times when Spanish property is seen as a safer bet than British assets.