This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
Spain is still deep in the grip of the Coronavirus health crisis with arguably the worst numbers on the planet in terms of contagion and death rates, and with awful economic news on the way once the health crisis starts to subside. So we are still in the eye of the storm as I publish this second part of results of my survey of opinions of how this crisis will affect the Spanish property market, in particular the holiday home market.
Last week I published the key findings taking all 607 survey respondents together. You can read the report here: Coronavirus and the Spanish property market survey results part I – a serious threat and opportunity.
This week we will look at how the different groups responded, and how they compare, where relevant. In other words we will look at how buyers, owners, vendors, and people in the business responded to the same questions, allowing us to identify differences of opinions, if any.
I’m going to keep this analysis short because I’ve had most of the symptoms of COVID-19 for more than a week and the relentless coughing and fever and fatigue are getting to me.
How long will the Spanish property market stay frozen?
When asked how long the market will stay frozen, buyers are the most optimistic with just 58% saying more than six months, compared to 68% of owners, and 76% of sellers. Only people in the business are optimistic enough to think that the market will be moving again within six months. Let’s hope they are right.
From a buyer’s perspective, it’s interesting to note how gloomy would-be sellers are, with 76% of them expecting the market to stay frozen for more than six months. That might make them more motivated to accept an aggressive offer.
What will happen to Spanish second-home prices?
On the question of prices, there is considerable agreement between buyers, owners, and sellers that house prices are going to fall significantly as a result of the Coronavirus.
Would-be buyers are expecting the biggest falls, with 67% expecting prices down more than 10%, and 98% expecting falls of some order. Owners, and would-be sellers have similar opinions on prices, with around 58% expecting big falls, and 35% expecting falls of up to10%. Once again, only people in the business are more optimistic, with just 41% expecting big falls and 48% expecting small falls. People in the business are either the best informed, or the most guilty of wishful thinking.
What will be the impact on foreign demand?
Once again, would-be buyers are the most pessimistic, with more than 90% expecting a temporary or permanent reduction in foreign demand for homes in Spain. The trade are most optimistic, with almost 30% expecting foreign demand to return to normal in a few months time once the worst of the crisis is behind us.
What will buyers do?
What do the different groups think would-be buyers will do in the light of the coronavirus crisis?
Would-be buyers themselves say wait for bargains to appear in 52% of cases, whilst 19% say no change in plan, and 28% say they will abandon their plan to buy this year. So, more than half of people who consider themselves looking to buy will now be bargain hunting, whilst the market might also have to deal with a collapse in demand of at least one third.
What owners think buyers will do is very close to what buyers say they will do. Sellers, on the other hand, think more would-be buyers will abandon the market this year, and less will go bargain hunting. So, as far as sellers go, there is good news and bad news; the good news is there might be more buyers around than they think, but the bad news is they will be looking for big reductions in asking prices.
What will sellers do?
Sellers say they will take their homes off the market and wait for better times in 41% of cases, which only 8% of buyers were expecting. So buyers might find they are bargain hunting in a smaller pool of motivated sellers.
Almost 50% of sellers will not change their plans, and only 11% are going to drop their asking price straight away to try and attract a buyer, which 42% of buyers are expecting them to do. So once again buyers and sellers have different expectations exacerbated by the lack of market transparency. These factors bung up the market at the best of times, and at a time like this you might see the market blocked for longer than it should be because buyers and sellers have unrealistic expectations made worse by the lack of transparency.
That said, with a crisis of this magnitude, I assume there will be some distress sales in the first three to six months after travel restrictions are eased.
About the respondents
The average age of respondents was 58.5 years, with a mode (biggest group) of 63 years old. 76% of respondents were between 49 and 76 years old, and 50% were over 60 – a Coronavirus risks group!
Next week I will publish a selection of the many thoughtful comments the respondents submitted. There are too many to publish the whole lot.
Chris M says:
Thanks Mark, as always very ‘insightful’ and we will see how this pans out.
It seems to me there will of course be less buyers, but then there will be equally less sellers, there will be some ‘distressed’ sales but not so many as people might think. However, overall there will be a market, and that will evolve in its level of activity and its own path over the next couple of years. And will be dependent on what happens generally over the new month or two.
The only thing for certain is that this will inevitably be on a different route than was ‘predicted’ at the start of the year.
So the next thing, all of use who follow your blog and website, want to hear is that you are safe and well, recovering from the virus.
So please take care of yourself and your family.
edward711 says:
Great work Mark (get well soon) and very interesting. It’s almost shaping up to be a long stand off between buyers & sellers which is my opinion could well lead to a no winner scenario. What is hugely significant is the ages of respondents. From the stats it appears the stand off will hugely effect all. With so many potential buyers suffering cuts to income I would imagine a scenario where people less effected with a fixed income i.e. pensioners would still be looking to buy however with sellers holding off awaiting the market to re-ignite down the line all could miss out. People with effected income still looking to buy will most likely be budgeting down and that could well depend on credit been released by banks etc. There are many people who held on to their properties in the last bust for years hoping the market would improve and in effect they lost out even more as it took so many years to improve. As a family looking to buy we personally will be looking at properties that have interested us recently but will await big price drops. I feel bit guilty doing this course of action but I have also suffered heavily in last boom so I suppose these things swing in round a bouts.
taxfreelt says:
I think many respondents forgot how was lasted last crisis. Let’s look at Spain house property index. We can see that crisis was ended in 2009 but prices made bottom significantly later, en 2012 – 2013. This crisis much harder. And we can expect bottom in prices only 2-3 years later at least
SurveySpain says:
Insightful as always Mark. Thanks for taking the trouble to set up the Survey and for making the results available. All information is of assistance to those directly involved in advising clients on values. The direct evidence we are finding from daily study of asking prices, is that there are a number of properties ‘disappearing’, presumably pulled off the market by the sellers, as they are many more than can be being sold. Others are showing prices dropping, I’d say averaging 10-15% now, but bearing in mind that there is always demand for prime property, whilst secondary suffers price reductions, and tertiary ‘falls off a cliff’. New build is shakey and it will depend upon the resources of their finances and backers, whether their nerve will hold. Once one or two drop their prices, others around will have to do so too.
As stated elsewhere, the market didn’t bottom out until 4-5 years after the last crisis hit. If it was just the virus, we could expect things to get better sometime towards the end of next year. However, the worldwide economic effects are going to be significant and how Governments are going to try to recover from the huge debts they’ve incurred, as have many individuals and businesses, is going to be the determinant of how bad this is going to be. Unfortunately, the calibre of many countries’ leaders, leaves few who can take on the respected ‘world leaders’ role that is required.