Foreign demand recovered somewhat over the summer, but travel restrictions, and other consequences of the coronavirus pandemic continued to keep almost a quarter of the market in abeyance.
There were 11,640 home sales involving foreign buyers inscribed in the land registry in the months of July, August, and September, according to the latest report from the Association of Spanish Registrars.
That represents a decline of 24.3% compared to the same period last year, but also a considerable improvement on the 50% decline in Q2, which was caused by the first lockdown.
But as you can see from the chart above, foreign demand has been gradually declining since 2017, so there is more going on than just the pandemic. Even so, Covid-19 is obviously the main reason why sales plunged in Q2, and failed to recover by more than 75% in Q3.
In comparison, local demand was down a more modest 15.5% on last year, having declined 40% in Q2. As you would expect, foreign demand for property in Spain is more sensitive to pandemics than local demand, more discretionary, and more hampered by travel restrictions.
As a result of the partial recovery in foreign demand, the market share of buyers from abroad rose to 11.4% in Q3, up from 10.7% in Q2. So more than one in ten Spanish homes are still bought by foreigners, and the market was worth more than €1b in Q3, assuming an average purchase price of €100,000 or more.
Looking at foreign demand broken down by nationality, buyers from the UK were still the biggest group by a wide margin with around 1,500 purchases (13% of the foreign market), followed by France and Germany.
Most foreign markets were down significantly in Q3, but not all. There were actually more buyers this year from Belgium and the Netherlands, and German buyers were down only a modest 6%. British buyers were down 31%, but the biggest declines came from two of the biggest sources of ‘Golden Visa’ buyers, China and Russia. The impact of the pandemic on the Golden Visa market is a question for another day.
British buyers are also having to contend with Brexit, which is sure to be influencing their decisions. The good news is that, with these numbers in hand, Brexit does not appear to have crushed British demand for property in Spain – the pandemic has done far more damage. But then again, maybe it’s still too early to tell. Brexit only became a reality on the first of January this year, when the transition period ended. In the week since then Brexit chaos has not materialised, as far as I can tell, but with the coronavirus pandemic still raging and disrupting everything, it’s hard to know what is going on. We will just have to wait and see what happens to British demand in the course of 2021.
The coronavirus pandemic has been devastating on so many fronts, and the Spanish property market has not escaped the carnage. But it’s reassuring to see that, though down almost 25% in Q3, the foreign market has not been routed by Covid-19, and all the other headwinds it is facing. Maybe the worst is yet to come, but what numbers we have today suggest that, so far at least, foreign investors haven’t yet given up on Spain.