The coronavirus pandemic might have energised a Spanish housing market that was running out of steam before the virus struck, which begs the question how long will that impetus last?
Last week I looked at Spanish property sales in the last quarter of 2021 showing how transactions were up 17% in Q4, and analysing the quarterly change in sales over the last few years. Here I’ll provide some new charts looking at the annual sales figures that provide us with a bigger picture.
The data source is the same – the Spanish notaries’ association. Their figures show that there were 676,775 homes sales in 2021, up 38% compared to 2020 and 18% on the pre-pandemic year of 2019. That suggests the Spanish property market has more than made up the ground it lost to the pandemic, as you can see from the chart above.
The chart tells the market story from 2007, which was when the Spanish property bubble burst. You can see a steep downward trend in sales between 2007 and 2013, in which year the market bottomed out with under 300,000 sales (the increases in 2010 and 2012 were purely down to bank repossessions being counted as sales). 2014 was the year the recovery began.
Given how deep the Spanish property crash was, you could argue the recovery was never proportionate – it should have been much stronger. It only lasted five years before the market turned down in the face of growing headwinds like higher costs, threats to property rights, and political uncertainty reducing the confidence and appetite of home-buyers and investors alike. The pandemic didn’t end the expansion – sales declined in 2019, a year before the pandemic struck.
But the growth in 2021 was quite remarkable, even allowing for some pent up demand from 2020. Last year ended with the market almost a fifth bigger than it was in 2019, with particularly strong growth in the single-family home segment, up 38% compared to last year, and 34% compared to 2019 (flat sales were only up 13% in comparison). It seems that the pandemic might have revitalised the Spanish property market in some way, like encouraging families to make lifestyle changes that involved changing home. That is certainly something that estate agents are reporting.
Home sales by region in 2021
The growth happened in almost all regions of interest to foreign investors. As you can see from the chart below, sales were greater than 2019 in all popular regions with the exception of the Canaries, where that market in 2021 was 2% smaller than 2019. In contrast, sales were up 23% in Andalusia.
If the pandemic has energised the market, the effect could be short-lived. The market is still facing the same headwinds it was before the pandemic, plus new ones like rising costs, and the war in Ukraine making everyone nervous. Uncertainty seems to be greater than ever, which might encourage some people to buy a long-term “low risk” investment like property taking advantage of historically low borrowing costs, whilst other people will choose to wait and see. Which attitude turns out to be dominant will decide where the market goes from here.