The number of Spanish homes acquired by foreign buyers increased in the second half of last year at the slowest rate since the second half of 2010, and growth would have been even lower had the the British not continued their love affair with property in Spain.
Foreign buyers acquired 50,249 homes in Spain in the last six months of 2018, up 1.4% compared to the same period a year before, reveals a report just published by Spain’s General Council of Notaries, a trade body. Notaries witness the vast majority of property sales that take place in Spain, and according to their figures, foreign buyers made up 18.2% of the market, down from a high of 20.3% in the second half of 2015.
Although the number of sales involving a foreign buyer increased in the period, the notaries point out that, “in comparison to the previous year, the increases registered in the two halves of 2018 were a long way from the results of 2017, when growth was above 10%.” Foreign demand looks like it might be running out of momentum.
The notaries break down the figures into resident and non-resident purchases by foreigners, showing that non-residents purchased 22,111 second homes in Spain between August and December last year, compared to 28,138 purchases by foreigners living in Spain. So non-residents accounted for 44% of foreign demand, and expats living in Spain 56%.
Non-resident demand fell by 4.9% in the period, after a decline of 0.7% in the first half of the year, whilst expat demand rose by 6.9%, down from 11.3% in the first half. The notaries point out that both segments are now retreating from the high levels of growth common in recent years. Referring to expat demand the notraries say “It appears that the trend towards growth in the purchases of real estate by foreign residents, which had been growing by more than 10% every semester since 2014, has been interrupted.”
The left hand chart above (blue) illustrates how foreign demand for Spanish property has changed since the base period of the first half of 2007, whilst comparing it to local demand. In the first two years both local and foreign demand collapsed by around 60%, but then foreign demand started to recover, whilst local demand (bright blue) continued in the doldrums until the start of 2014, and is still 40% below its peak after four years of recovery. Non-resident foreign demand – primarily Western Europeans buying holiday homes (dashed line) – recovered by 2012 and is now around 70% higher than it was at the height of the boom, whilst expat demand – primarily economic migrants but also some Western Europeans moving to Spain (solid blue line) – recovered by 2015 and ended last year 40% higher than 2007. In both cases you can see how demand showed signs of turning down in 2018, though the same could also be said of local demand.
The chart on the right (yellow) shows how spending by locals and foreigners (non-resident and expat) has changed over the same period. Local budgets (red line) declined until the end of 2014, and have barely recovered since, with the amount spent on property in terms of €/m2 still around 35% lower than it was in 2007, whilst non-resident foreign spending has recovered to 95% of what it was, and expat spending is around 85% of what it was. If you need to sell a property in Spain you better hope it will interest a foreign buyer.
Next week I’ll look at the breakdown by nationality of foreign buyers and where they buy. As I will discuss in more detail, the British are still by far the biggest group of foreign buyers and their numbers just keep growing having recovered after the initial shock of the Brexit referendum. With buyers from most other western European countries starting to lose their appetite for Spanish property, maybe it’s Brexit that keeps driving the Brits to Spain.
Thoughts on “Foreign demand for Spanish property retreats in the second half of 2018 reveal the notaries”
The foreign market is not yet fully aware of the prohibitive restrictions on short lets. This will impact heavily particularly on apartment sales. Rental income from holiday lets is a principle consideration, if not THE principle consideration, in a purchase.. The higher cost shown by foreigners in your interesting table may already be reflecting this. It would be interesting to see a breakdown between apartments and villas.
These restrictions, while i well understand their purpose, are unnecessarily heavy handed, and will also badly affect the backlog of apartments waiting to be resold by banks..
Mark Stücklin says:
Yes, holiday rental restrictions will have long term consequences for the market. They reduce demand for holiday homes in Spain.
Chris M says:
I am looking forward to your post this weekend on the nationalities and numbers buying, particularly to see how the British can still be seen as the highest number of buyers and that their numbers keep on growing, I have to say that notion has me befuddled to say the least, but you the man when it comes to getting any kind of decent stats out of this market.
Behrou G. says:
Is it just me or the second half of the year is when we had a Socialist-Podemos government?! 😉
I hope the coalition doesn’t repeat because it will definitely be bad for investments including in real estate. Pigtails was already talking about a €600 minimum income and 34 hour work days a couple of days ago and that’s with him being snubbed by the PSOE at the moment. I can’t even imagine the damage they will do in a coalition government.