It’s a basic question I’ve never seen answered before. How much do foreigners buying homes in Spain invest in the Spanish property market each year?
It’s an interesting question because it gives you an idea of how valuable this industry is to the Spanish economy, and how big a market we are talking about in monetary terms for everyone involved in the industry. The bigger the contribution to the Spanish economy, the more politicians should take steps to promote the industry, and the bigger the market, the better it is for all market actors like buyers, sellers, and property professionals.
So, how valuable is the foreign segment of the Spanish property market? By which I mean how much does the market involving foreign buyers of homes in Spain turnover each year? (not including foreign funds investing in the Spanish housing market, and not including all the associated spending such as legal fees). To answer this question all we need to know is:
- How many homes are sold in Spain in a given year
- The average sales price
- The number of foreign buyers as a percentage of the market
Using figures from Spain’s Association of Public Notaries, it is possible to answer these questions.
In answer to question 3, the latest foreign-segment market report from the notaries states that “The operations of foreign buyers represented 18.7% of total home sales in the period [the second half of 2019], in line with the average between 2012 and 2018.” So I use 18.7% to represent the share of foreign buyers in recent years, at least before the coronavirus crisis blew everything up.
Answering the other two questions is straightforward. I used the online database published by the notaries to get monthly home sales figures and average prices, allowing me to calculate the turnover value of the Spanish housing market in each month of 2019. I then add up the monthly figures to get the total value of the Spanish housing market in 2019, and take 18.7% of that to answer the question how much did foreign buyers invest in the Spanish property market in 2019. All the figures are given in the table below.
More than 1% of Spanish GDP
The answer is foreigner buyers invested €17.1 billion in Spanish homes in 2019 (slightly less than in 2018), which means we are talking about a big and valuable market. Unless I’ve got these quick and dirty numbers badly wrong, that’s almost 1.4% of Spanish GDP in 2019.
And if you assume that 50% of foreign buyers did so without local mortgage financing, using equity from abroad, then housing attracted some €8.5b fresh foreign capital to Spain in 2019, not including the sizable investments made by big foreign investment funds, which are not included in these figures.
Note that, according to the Spanish Land Registrar’s Association, the foreign-buyer share of the market was 12.7% in Q4 of 2019, significantly lower than the share calculated by notaries. I can’t explain the difference without digging a lot more, but if you use the registrars’ figures, the foreign buyer segment turnover in 2019 would have been around €11.6b.
Let’s assume the figures from the notaries gives us the best picture. A market of this size should get lots of support and helpful attention from Spanish politicians doing what they can with fiscal and urban planning policy to help the market grow, creating wealth and jobs for Spain and their voters. In reality, many of the problems this market faces are created by the Spanish government, which seems to be unaware of the value of this market, and it’s potential to the Spanish economy. Spain could be the Florida of Europe, but it has never really lived up to its potential.