Whilst the local and international press are reporting contradictory stories from the Spanish property market, a new report from Amat Immobiliaris, one of the longest established agents in Catalonia, helps us understand what is going on in Barcelona.

The other day Bloomberg reported that ‘Spain’s $6 Trillion Home Market Faces Second Crash in Decade’.

“Spain’s $6 trillion home market looks headed toward another crash,” explains the article, citing “economists who are studying the impact on property demand stemming from Europe’s strictest pandemic lockdown.” It goes on to warn of price drops of 6.5% to 15% in 2020.

At the same time Reuters are reporting that ‘Spanish property prices grow slowly but new-builds are booming’ as they go on to report that “prices for new-build properties, typically favoured by big investors, grew 6.1% year-on-year, up from 5.3% the previous quarter, suggesting demand among institutional buyers remained buoyant despite Spain’s stringent lockdown.”

It’s difficult to reconcile these contradictory stories describing the same property market. The local press reports are equally confusing, describing a market with plunging sales and rising prices.

What is really going on? Given the lack of transparency in the Spanish property market, it’s always a difficult question to answer, and the fast changing situation means we have to aim at a moving target. But one of the best picture’s I’ve seen so far came in a presentation by Guifré Homedes, boss of Amat Immobiliaris, the longest-established real estate agency and property services firm in Catalonia, with offices in Barcelona and surroundings, and operations on the Costa Brava and Maresme coast. Amat’s core market is property for sale in Barcelona.

Guifré provided data showing how Amat was doing quite well before the coronavirus crisis struck, with both home sales and rental contracts up almost 20% in the first quarter of the year compared to last year.

Then the Covid-19 crisis exploded and, from one week to the next, Spain was locked down with one of the harshest confinement regimes on the planet, and customer enquiries fell by 80% in the first week.

The chart below illustrates Amat’s commercial activity with rental and purchase customers in the first 24 weeks of 2020, including the lockdown period indicated between two black lines.

You can see how visits – the blue line – fell to nothing immediately, whilst purchase (yellow line) and rental (grey line) plunged at first, taking total enquiries (orange line) down with them, before starting to pick up again less than half way through the confinement period, then surging after the lockdown ended, before falling back again.

Guifré explained how 25% of rental agreements reached before the crisis have subsequently fallen apart, whilst just 1% of sales agreements have unravelled, suggesting that committed buyers have taken the crisis in their stride. Amat have seen a change in customer preferences, with more interest in the suburbs and property with outside spaces like terraces.

Guifré also explained that:

• There has been a decline in the number of homes for sale as owners have taken their properties off the market. However, Guifré expects they will be back on the market before long with “a more realistic price.”
• They have seen no impact on the rental market from the Airbnb segment, which in theory could flood the market with furnished homes that can’t be rented to tourists.
• The shortage of new developments in the Barcelona area is in stark contrast to the situation in 2008, when the real estate crash forced many developers out of business. Developers in the Barcelona area are not dangerously exposed to the current situation. Sales are taking place in line with price lists.
• They have seen no impact on sales prices so far. Sales made since the lockdown ended have been at the same price level as before the Coronavirus pandemic hit Spain.
• Likewise, it is too early to identify any change in trend for rental prices, which have been rising slightly in the year to date.

Forecasts are a risky business, but Guifré shared Amat’s business assumptions for the rest of the year. After the initial post-lockdown bounce we are seeing, as pent up demand uncoils, they expect demand to soften in the last quarter of the year, and forecast year-end with sales down 40%, and rental contracts down 20%, with a generalised swing in the market from sales to rental. And they forecast more uncertainty.

It’s fair to say the coronavirus crisis will have a significant impact on the Spanish property market, but the rebound after lockdown is looking more positive than it might have been, and things might not turn out as bad as pessimists like me expected. The press reports are contradictory and leave people confused. The market data provided by Amat give us a better picture of the situation, which is not as bad as I thought, but we are not out of the woods yet.