Foreign demand is still almost 20% lower than it was a year ago, when the coronavirus first started to turn the world upside down.

Back at the start of March last year we knew about the virus in China starting to spread in Europe, but life was still pretty normal in Spain; there were even huge feminist marches on the 8th of March to mark international women’s day, making it hard to believe we would all be confined to barracks less than 10 days later, starting on the 15th of March. So the first two and a half months of the quarter were largely unaffected by the coronavirus, which explains why sales that quarter were only down by 6.4%.

That said, the trend was already heading down before Covid-19 came to town, with a growing number of headwinds like political tensions starting to turn some foreign investors off Spain. But C19 was a hurricane in comparison, making all the other market forces, positive or negative, look like a gentle breeze. 

So, how did foreign demand in Q1 this year compare to the same quarter last year, when all but two weeks were relatively normal? The answer is, not great, largely because C19 is still making it difficult to travel to Spain.

There were 12,561 Spanish home sales involving a foreign buyer in the first quarter, down 17.8% compared to Q1 2020, according to the latest data from the Association of Spanish Land Registrars (chart above).

The chart clearly illustrates the lockdown period, and subsequent recovery, that has still left the foreign market almost 20% smaller than it was before. That’s about 3,000 fewer home sales, and something like €450m of lost foreign investment. Just another reason why things don’t look great for the Spanish economy.

Foreign demand by national markets

By markets, the British were still the biggest foreign group of buyers with 1,521 purchases and 12.5% foreign market share, followed by the French and the Germans, as you can see from the following two charts.

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How did national markets fare compared to last year? Unsurprisingly, the Golden Visa markets of China and Russia did worst, down 58% and 33% respectively, as they were hardest hit by travel restrictions, amongst other factors. The key European second-home markets of Germany, France, the UK, and Holland, were all down around 20%, whilst Sweden and Belgium proved more resilient with a decline of 11% and 5%. The ‘rest’, which includes first and second home buyers from all over the world, were down 17.7%.

Foreign market share

Local demand has weathered the coronavirus storm better. Spaniards purchased 116,667 of the homes inscribed in the first quarter, up 4.1% on Q1 last year. As a result, the foreign market share of the Spanish housing market fell to 9.7% in Q1, down from above 12% before the pandemic. Unfortunately, locals are not buying the homes that were previously being snapped up by foreigners. Those homes are going largely unsold.

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Where are we heading?

In recent years, foreign demand peaked in Q2 2018 with 17,338 sales, and then went into gradual decline before plunging with Covid in Q2 2020.

If you take Q1 2019 as the pre-Covid base-year, then the foreign market is still 23% smaller than it was in volume terms, mainly, but not necessarily all, because of C19 (there are other factors like Brexit and Spain’s high taxes to also take into account).

According to estate agents, the high end of the market is booming again in places like Marbella and the Balearics, in which case the pain is falling disproportionately on the mass market in places like the Costa Blanca.

Some groups have done well economically over the pandemic, some have been ruined, and some are living on borrowed time in furlough schemes. I can imagine the high end bubbling along nicely for a while as rich buyers seek holiday homes with space in the sun, but I can also imagine the mass market struggling to do any better than it is now, at least for a while, some 20% below where it was.