Foreign demand hits all-time high in third quarter

Foreign demand for property in Spain hit an all-time high in the third quarter of the year, according to the latest figures from the land registrars.

The deeds of 26,728 Spanish property sales involving a foreign buyer were inscribed in the land registry in Q3, up 61% on the same period last year. Compared to Q3 2019 pre-Covid, sales are up 73%.

The chart above, which illustrates both sales and the annualised change each quarter since 2013, shows how foreign demand for property in Spain has boomed since the end of 2020. This can no longer be attributed to pent-up demand from 2020 that was suppressed by the pandemic. The increase in sales has been much too large for that explanation. 

The growth in foreign demand in Q3 was much stronger than local demand, which only increased by 2% in the period. As a result, the market share of foreign buyers rose to 15.9% in Q3, the highest level on record, as illustrated in the next chart.

By nationality, the British were the single biggest group with 2,486 acquisitions (9%) of the foreign market, followed by the Germans with 2,149 (8%), and the French some distance behind with 1,660 (6%). The composite group of all other nations that the registrars lump together as the ‘rest’ made up 37% of the market with 9,884 acquisitions. 

Looking at growth by nationality, the biggest increase came from Poland (+179%) and Ukraine (+133%), and not far behind, Bulgaria (+63%). It’s not hard to imagine that being near Russia has suddenly become a powerful incentive to buy a bolthole about as far away as you can get from Russia in Europe. Even the British market increased by 51%, despite or because of Brexit. The only significant market to decline was Morocco, which is in a different market segment (economic migrants) to European countries (life-style and holiday-home buyers).

Berni Walker, who runs the Spanish property portal thinkSPAIN.COM, confirms that foreign interest has been massive this year. “The first half of the year is when house-hunters are out and about, and the second half is when many sales are closed,” says Berni. “We saw incredibly high levels of searches from outside of Spain in the first half, so you would expect the number of sales completed to rise in Q2 and Q3.”

It’s worth noting that the sales inscribed in the Land Registry lag the market by a month or more, so these figures mainly refer to sales that were completed in Q2. What factors might have driven the surge in sales these figures reflect?

Rising mortgage borrowing costs are one factor that might have encouraged some buyers to get ahead of the curve and purchase with a mortgage before interest rates get any higher. If so, that boost will wear off before long.

Other potential factors include the war in Ukraine making Spain look like a safe haven (far from Russia, protected by the Pyrenees, with a gas pipeline to North Africa), Covid lifestyle changes in favour of outdoor climates, and the cost of living crisis that makes relatively cheap countries like Spain look more attractive.

According to Katya Moshnikova of Urbane International Properties, a Barcelona-based agency, high volatility in other asset classes, especially crypto, has made property shine again. “The whole drop in crypto and other types of asset classes, especially since the war began, is making property a refuge investment,” says Katya. “We hear this from clients themselves saying there’s nothing left to invest in so I’m going back to property, which is far less volatile. Also there’s still the spill over from Covid and work from home that has given property a higher relevance than before, leaving people prepared to spend more money, even on second-homes.”

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