Though real estate agents can now conduct property viewings in those areas in phase 1 of the Spanish de-escalation plan, two months of lockdown has taken its toll on an industry with erratic cash flows, and experts fear that 25% of Spanish real estate agents will close down as a result, with the loss of some 35,000 jobs.
“There were lots of small agencies that were just a sales person with a telephone and a secretary, which were already struggling to get to the end of the month, and those will close,” says Gerardo Duelo, President of the General Council of Real Estate Agents (API) in Spain. “The majority already had little business before the confinement began. And it’s also a sector that needs to move towards professionalisation.”
The lockdown made it almost impossible for buyers and sellers to exchange deeds before notaries, which is when estate agents earn their commissions. That interrupted cash flow from sales that were already in the bag.
Now that it’s possible to exchange deeds before a notary, sales that were under contract before the lockdown can go ahead, assuming buyers would rather not lose their deposits. However, the situation is still complicated for foreign buyers, who may not be allowed into the country under the present travel restrictions of the State of Alarm still in force. In that case, buyers will have to organise a Power of Attorney for someone in Spain to sign on their behalf.
There were 55,000 property brokers operating in Spain at the end of last year, according to official figures (INE) cited in the Spanish daily La Vanguardia. An industry insider quoted in the same paper forecasts that 25% of them will be driven out of business by the coronavirus crisis, which will reduce turnover for the sector by between 22% and 29%.
Real estate agents in Spain provide jobs for 150,000 people, up from 86,000 in 2013, and insiders forecast that some 35,000 agency jobs will go in this crisis. The last crisis was much worse, when real estate agents were decimated by the Spanish property crash, with 70% of agents wiped out and 180,000 jobs lost, as I reported back in 2009.
Real estate agency purge overdue
According to one insider quoted in La Vanguardia, a purge of the sector was already overdue. “There have been a lot of new entrants in the sector, yet sales haven’t increased, in other words there’s not enough market for everyone.” The lockdown “will bring forward many business closures that would have happened anyway, and will concentrate them in certain areas, for example where there are a lot of holiday homes, where sales will fall the most, and the recovery will be slowest.”
Survival of the fittest
Some industry insiders argue the sector will bounce back more professional, and in better health, as a result of the Covid-19 purge.
In contrast to the years of pain after the Spanish property crash that started around 2008, and didn’t bottom out until 2013, this adjustment is expected to be much quicker, a matter of quarters, not years. Sales will fall, but so will the competition, which will benefit the best-run survivors. Motivated sellers in need of liquidity will provide the market with a stimulus, as will the sale of homes of many of the elderly Covid-19 fatalities. “There has been a lot of mortality, and in general the heirs tend to put the homes up for sale,” says an insider.
Selecting which real estate agents to deal with will be more important than ever at a time when many are at risk of going to the wall.