The collapse in foreign tourists visiting Spain this year due to the coronavirus crisis is having a knock-on effect on the housing market in coastal areas where foreigners tend to buy, reports the Spanish press.
Sales have been “paralysed” by the lack of foreign investors on the ground, coupled with the caution of local buyers, reports the daily La Vanguardia.
In parallel, holiday-home owners in distress, and financial institutions trying to liquidate portfolios, are increasing the supply of discounted homes on the market, with price declines of up to 20%.
Prices have fallen on average 8.2% in the Balearics and Canary islands, and 6.1% on the Mediterranean coast, according to the appraisal company Tinsa, as reported by La Vanguardia.
“Second homes will be the ones that have most trouble recovering from the impact of the coronavirus,” says Vicenç Hernández Reche, boss of Treshabitat y Tecnotramit, a real estate company, quoted in the La Vanguardia article. “From the point of view of demand they are not a basic necessity, and on the supply side they are a significant asset for generating cash if our economic circumstances have been affected by the crisis.”
The second home market was already on the slide in some areas before Covid-19, points out La Vanguardia. Sales were down 14% last year in the Canaries, 11% in the Balearics, and 10% on the Costa del Sol, due to a variety of factors like higher prices, Brexit, and slowing economies in the biggest foreign markets.
Foreign buyers were involved in 63,000 home acquisitions last year, 4% lower than the year before, and more than 10% down in the case of non-resident foreign investors.
The big problem for potential buyers from abroad is the restriction on travel, making it difficult to come to Spain on house-hunting trips without facing quarantine upon your return. Juan-Galo Macià, Managing Director of estate agents Engel & Volkers on the Spanish mainland, says that the problem has been partly solved by technology enabling sales sight-unseen, but points out that “the final decision to buy will normally be made with the buyer present.”
In the Costa Blanca, Engel & Volkers report they are seeing lots of offers up to 20% below asking prices, but expect to close the year with a much smaller average decline.
One real estate agent called Barnes, which opened an office on the Costa del Sol just before the coronavirus crisis exploded, told La Vanguardia that luxury home prices have already fallen by 20% in the segment with the least demand, whilst pointing out they don’t expect discounts in the super-luxury category of homes above 5€m because owners of those home will not be in any financial distress.
Rafael Gil, research director of Tinsa, argues that the recovery in foreign demand will take longer to start than local demand, but once it gets going again, it will recover quicker. As far as potential local buyers go, they are holding back to see how the crisis affects their finances before signing up to a long term financial commitment, and renting holiday homes or staying in hotels for now.
Aggressive discounting of property portfolios in coastal areas by funds and banks is driving the price declines of holiday-homes, reports La Vanguardia. Organisations like the Sareb, also known as Spain’s ‘bad bank’, are trying to dump these kinds of assets with discounts of 25% or more, reports the article.
Still buyers out there
But, as in every crisis, some players are doing relatively well. Iain Tozer, commercial director of the PGA de Catalunya golf resort in Girona, inland from the Costa Brava, told me that home sales on the resort have recovered remarkably since the lockdown ended. “In the second half of June and July sales were very strong, and we recovered a lot of lost ground, with prices holding firm as we found buyers more interested in getting what they need now than holding out for discounts that might never materialise” he says.
But, with fewer foreign buyers around, and more demanding ones at that, it might be that only properties that tick all the right boxes have any hope of selling in the current market, at least without a stiff discount.