Foreign demand in Q2 2021: Slow recovery in the face of Covid and Brexit

Foreign buyers were involved in 13,652 Spanish home sales in the second quarter of the year, according to the latest figures from the Association of Spanish Land Registrars.

That represents a 67% increase on the same period last year, when the market was impaired by almost two months of lockdown. The chart above shows quarterly sales (left axis), with the second quarter each year in dark blue for easier comparison, and the year-on-year percentage change each quarter shown by the red line (right axis).

A big increase in Q2 sales this year was to be expected, because last year everyone was confined to barracks. Comparison with last year is almost meaningless because the market was shut down by lockdown. It’s more helpful to compare sales this year with 2019 and 2018 to see how we are going.

If you compare foreign demand between April and June this year, with sales in the same period of 2019, you see the foreign market is still 16% lower than it was before the pandemic, and 21% lower compared to 2018. So foreign demand has not recovered all the ground it lost to the pandemic.

The local market is a different story. Home sales involving Spanish buyers rose 81% in Q2 compared to last year, 9% compared to 2019, and 6% compared to 2018, suggesting that the local market has more than recovered from the pandemic, at least for now. As you can see from the next chart, showing total demand (local plus foreign), the Spanish housing market has staged a strong sales recovery since the depths of Q2 last year, mainly thanks to strong local demand.

As a result of the two-speed recovery, foreign demand as a share of the Spanish housing market has been driven below 10% for the first time in more than a decade, as illustrated by the following chart. The market share of foreign buyers was 9.95% in Q2.

Foreign demand by nationality in Q2 2021

The British are still the biggest group of foreign buyers, but only just. Buyers from the UK were on 1,296 purchase deeds recorded in the Land Registry in the second quarter, just ahead of the Germans with 1,234 acquisitions. UK market share has fallen from 20% just before the Brexit referendum, to 9.5% now, the lowest level on record since the Registrars started publishing sales by nationality back in 2006. So Covid-19 isn’t the only strong headwind holding back the market; ‘Real Brexit’ is also taking a big toll.

French buyers, normally in second place behind the British, fell to fourth place behind Moroccans, although the two groups operate in very different market segments. All markets rose in the period, from a paltry 1% in China (bad news for the ‘Golden Visa’ segment), to 138% in Poland. The following charts illustrate foreign demand broken down by nationality in the second quarter of 2021.

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In conclusion the pandemic has significantly diminished the importance of foreign demand to the Spanish housing market, at least for now. Perhaps, if and when the pandemic is finally behind us, and all travel restrictions have all been lifted, foreign demand for Spanish property will recover fully, and grow to new heights despite Brexit and Spanish regulations that discourage foreign investment. For the time being the recovery in foreign demand is slow, and the market is still 16% smaller than it was before the pandemic. That said, some segments are doing better than others. Agents report that high-end markets in places like the Balearics, the Costa del Sol, and the Costa Brava are booming with strong local and foreign demand, even if prime segments are too small to move the needle as far as official figures go.