The British have long been the biggest group of foreign buyers of property in Spain, and are key to the fortunes of the second-home market on the Spanish costas. These charts will help you understand the current state of British demand, which has been sent into a spin by Brexit, just like everything else.
There were 2,193 home sales involving British buyers registered in the Spanish Land Register in the third quarter of the year, according to the latest report from Spain’s Association of Land Registrars. You can see quarterly purchases by British buyers in the chart above.
The number of British buyers in Spain was the lowest it has been in the third quarter since 2014, but is still significantly higher than it was in the crisis years between 2009 and 2013, as you can see from the following chart, based on half-year figures from the Association of Spanish Notaries.
Looking at the year-on-year change in British demand there were 16% fewer buyers in Q3, following on a 17% decline in Q2. Whereas demand increased steadily between 2010 and the Brexit referendum in 2016, since then the British demand curve has been up and down on a shorter wavelength, rising and falling in shorter periods as illustrated by the next two charts, the first one quarterly from the registrars, and the second half yearly from the notaries.
UK market share of foreign property demand
Although the number of British buyers declined in Q3, the UK market share of the foreign market actually increased from 13% to 14%, because overall foreign demand fell more. As things stand the British are still the biggest group of foreign buyers by a long stretch, and continue to be vital to the second-home market on the Spanish costas.
The strength of the Pound is one of the key drivers of British demand, as a strong Pound increases the spending power of British buyers in Spain. British demand clearly rose with a strong Pound up to the Brexit referendum, but then didn’t fall as much as I expected when the Pound crashed towards parity after the referendum.
The Pound is currently the strongest it has been in almost three years on hopes of a Conservative majority in the pending General Election, and an orderly exit from the EU. But the pound is still much weaker than it was before the referendum, and there’s no reason to think the current exchange rate with the Euro will boost British demand for property in Spain.
Insight from the market front line
British demand is on the slide overall, but the requirements of buyers are also changing. “We have seen UK interest in Q3 decrease in general, but the decline was most acute in some segments like detached houses under €500,000, which had a dismal quarter,” explains Conor Wilde, boss of Found Valencia, one of the leading real estate companies in the Valencian region. “On the other hand we have seen a slight increase in UK demand for Valencia city apartments under €500,000. People are just moving on with their plans while this Brexit plays out. We are also seeing an increase in interest in buyers from the UK looking for the Spanish Golden Visa. Some of them are already buying, whilst a considerable number are waiting to see the Brexit outcome.”
Where is British demand for Spanish property heading?
When trying to understand where the market is heading I like to think in terms of headwinds and tailwinds that lift or hold back the market. I recently did a headwinds/tailwinds analysis on foreign demand in general, which also applies to British demand. But every market has its individual factors, and in the UK the outcome of the General Election next Thursday could have a big impact on demand for property in Spain.
With a choice between bonking Boris and Comrade Corbyn on the ballot I can see how a Conservative victory would be better for the economy, and might increase demand from Remainers looking to stay in Europe as individuals, if not as a country, perhaps taking advantage of the Spanish Golden Visa budget permitting. On the other hand a result that puts Corbyn in number 10 would see Marxists in power for the first time in British history, which I would expect to be bad news for the British economy and UK spending power in Spain. That might lead to capital flight, and perhaps an increase in the number of people deciding to leave what they see as a sinking ship. So both results might increase British demand for Spanish property for different reasons though, on balance, I would expect a Conservative victory to be better for the Spanish property market than a Labour victory. Let’s see what next Thursday brings.