British demand for Spanish property has recovered from last year’s Covid-19 slump, but is still lower than it was before the pandemic, mainly due to a steep decline in non-resident second-home buyers.
1,642 Spanish homes sales in the third quarter of this year involved a British buyer, up 8% compared to last year (chart above showing quarterly sales and annualised change), but down 26% compared to 2019, and 37% compared to 2018, all according to the latest figures from the Spanish Land Registrars’ Association. The British were the second biggest group of foreign buyers, behind the Germans. This is the first time the British have not been number one since records began.
The next chart, showing the annualised change in demand by country, illustrates how feeble British demand was in Q3 compared to almost all other nationalities. Only Norway and Belgium were lower.
As a result of the UK’s declining demand for Spanish property, the UK’s market share of foreign demand fell to 9.9% in Q3, almost the lowest level on record. The next chart illustrates the obvious decline in British market share since its peak just before the Brexit referendum in 2016.
British demand used to be obviously correlated to the strength of Sterling, but the relationship is not so clear any more. The exchange rate has been fairly stable since 2017, whilst British demand has continued declining, even taking into account the impact of the pandemic.
British demand for Spanish property in the first half of 2021
The Spanish Notaries’ Association also publishes data on sales by nationality, in their case on a half-yearly basis, providing a breakdown between resident (Brits living in Spain) and non-resident buyers, illustrated in the chart below. The latter group are primarily buying holiday-homes.
This data shows that resident British demand is holding its ground, down just 2% compared to 2019, and 6% compared to 2018. But non-resident demand has plunged this year, down 47% compared to 2019, and 56% compared to 2018, and even down 5% compared to last year, when the pandemic was at its most disruptive.
The next chart comparing British and German non-resident demand helps illustrate the decline. The Germans are now in front partly because their demand has increased this year, but mainly because of the collapse in British demand. The Germans are still nowhere near the levels of demand reached by the British as recently as 2018.
The notaries also provide data on spending per nationality. The British still buy a lot compared to others, but they spend less than the average, and significantly less on average than the Swedes, Danes, Germans, and Swiss.
Why is British demand for Spanish property declining?
As we have seen, the decline in British demand comes mostly from the non-resident segment. So what is driving the steep decline in British non-resident demand? Brexit is the obvious answer. ‘Real Brexit’ kicked in at the start of the year, with new limitations of the amount of time Britons can spend in the EU, and some extra inconveniences and costs that come with leaving the EU. It was also inevitable that British demand would start to wane one day, and I expect the downward trend in British market share to continue for the foreseeable future.
That said, the British were still the second biggest group of foreign buyers in Spain in Q3, just not as dominant as they have been in the last two decades. So the decline needs to be kept in perspective.
Furthermore, the overall decline disguises important differences between segments within the British market. People with fewer financial resources and smaller budgets are more likely to drop out when the the going gets tough. At the top end of the market agents report that British demand in upmarket locations like Barcelona, Sitges, Ibiza, Javea, Sitges, and Sotogrande is proving resilient. “In Q3 we saw a 39% increase in UK traffic,” says Muna Benthami, Marketing Director at Lucas Fox International Properties. “We have seen the British share of offers made on properties more than double this year, no doubt helped by vaccinations and easing of restrictions. We also see the pandemic’s effect on people’s lives rekindling British demand for the lifestyle Spain has to offer.” And according to Celeste Alonso, head of The Property Agent specialising in high-end homes in Sotogrande, “the luxury end of the market is booming, with a lot of demand from foreign buyers including the British looking for large properties and plots in premium areas across the Costa del Sol.”