A key-charts look at German demand for Spanish property in the second quarter of the year, plus market insight in comments from the front line.

German demand for Spanish property – key charts

Germany nosed ahead of France as the second biggest foreign market for Spanish property in Q2, albeit by just a handful of sales, leaving them both with a 7% market share of 7%, behind the perennial leader of buyers from abroad the British.

The next chart shows the volume of German demand every quarter since the beginning of 2013, with steady growth up to mid-2018, after which sales turned negative until Q1 2020, and then plunged in Q2 on account of the coronavirus pandemic, just like all other markets.

Year-on-year sales figures help illustrate the trend. It looks like German demand was recovering in 2020 after a period of weakness, before Covid-19 sent all markets into a spin.

Despite the ups and downs, the market share of German buyers has not changed much over the years at around 7%.

Comments from the frontline 

Florian Hofer, Managing Director of Engel & Völkers in Balearic Islands, shares his thoughts on the property market in Mallorca, where German-speaking buyers are dominant, and where most German buyers land in Spain.

Sales

Obviously, this year has been more difficult for buyers of all nationalities to physically come here because of all the restrictions.  However, this hasn’t dampened demand, and those clients that have bought made decisions quickly, they were serious and as soon as the borders opened, they came to buy.  One indicator that I would like to flag up is that PMI (Palma airport) had more passenger movements than any other Spanish airport in July (1.1 million pax movements). For E&V Mallorca in the month of July alone, the Group brokered 49 million euros worth of business.

Budgets

Clients have been buying at all levels (during the period Jan-July of this year E&V Mallorca made sales from 300,000 – 12.5 million euros).  If anything, there’s more demand for the premium end of the market.  The average price of property sold (period Jan-Nov 10th) was 1.58 million euros. If we look at price development from the independent real estate research company, Casafari, there’s no indication that prices are going down, and, in fact, they are at similar levels to 2019.  Bargain hunters will be disappointed.

Market Segments

As I said, the premium segment of 1-2 million euros is strong, and the lower end is not moving so much at this time.

The majority of our buyers are using their property as a second home and tend to be NON-RESIDENT. 

During this time, we have seen a trend which has been developing for some years of families renting or buying to sample the life here.  A good indicator is that many of the international schools are full.

The majority of our clients are cash buyers, and that hasn’t changed.

Rural/seaside property with space and views are selling well.

There’s demand for top new build projects, and these are in short supply.  In the southwest the luxury Cap Adriano gated development located in a prime seafront position is a good example.

Vendors

Vendors include people that have had businesses here and are finding it tough, or those that want to be closer to their family.

Asking prices are correct if clients follow our advice about the market, but not all vendors get the right advice.

If the asking price is correct, there might be a margin of negotiation for many properties, but our experience this year is that buyers have closed deals with offers at close to the asking price.

As far as sales times go, it takes an average of 6-12 months, and this year we have definitely seen property selling faster.  We have even made sales as a result of social media in this pandemic.

Looking Ahead

In the short term, trading will be complicated by travel restrictions.  However, we know that there is a lot of pent-up demand, and that when the restrictions are lifted, we expect another boom as we witnessed in July of this year. Many of our clients are making key “life” decisions based on the current circumstances.  For many it’s now or never…