Property market is not something we are all familiar with. It has its own rules and regulation people are not aware until they come to a situation where they need to quickly learn about the property market. When you come to the point in your life where you need to rent or buy an apartment, or perhaps even sell your own property, you come to realize that there is so much you do not know about the property market, and this can become a true obstacle in your endeavor. Each country has its own regulations about property market, which means that if your purchase is international, you need to consider the regulations of the country where the property in question is located. Sometimes, the regulations can even vary among cities in one country. The best way to be prepared is to learn some basic regulations that will help you manage the process of renting, buying or selling a property. Since we have been active on Spanish property market for over fifteen years, we wanted to share some of the most essential things you should know about Spanish property market if you are in the process of thinking about property management in this country. This will help you be prepared for exploring your opportunities and negotiating the best deals.

 

 

Property market boom

Starting from the late 1990s up until 2007, Spanish property market was booming. The successful economy brought this trend of property investment, which led to the average house price rising by 197%. In fact, this was one of the highest increases in price in the European countries reported at that period. The prices in the urban areas, mainly Madrid and Barcelona reported significant rise, but other areas of Spain, such as Galicia and Andalucia, also reported growth during this period. The most popular areas for property investment were the coastal areas, where the price of property surged up to 250%. This property market boom had a positive effect on the country’s economy. It was the time of high demand, and it was also the period when a lot of investment companies started to construct new properties thus leading to further development in the construction industry and new job openings. During this period, foreigners were mainly the buyers, mostly from the UK, France and Germany.

Crash of 2008

The period of prosperity and high property demand ended suddenly in 2008 when the financial crisis took place. The crisis affected many aspects of the economy on the global level, but when it comes to Spain, it had tremendously negative impact on the property market. The prices of Spanish property started to fall, and in total they fell by 41.4% from the end of 2007 until 2015. Consecutive years of price decline had a negative impact on the country’s economy, with the year 2012 becoming the peak of the crisis when the house price fell by 12% solely in that year. The following years brought a lower decline in price which ended with the year 2015 when the first rise of the prices was noticed. Even though the rise was only by 0.25%, this was still a sign that the Spanish property market started to recover. This was also an indicator of what is to follow, the year 2016, when after seven years of decline Spanish property market started to sore once again.

Spanish property market recovery

As the influence of the financial crisis started to decrease over the years, the economy started to recover, which had a positive influence on the Spanish property market. The year 2015 was a turning point, when even though pretty insignificant growth of the house prices was noticed, it still meant that the market is going in the right direction, meaning that the recovery is just around the corner. Good and stable situation on the property market is an indicator of a stable economy, which is why this is very important for the country’s economy. It is also closely related to the time of prosperous economy and improvements in standard of living, making Spain a desirable location for foreign investors once again. The complete report on the increase that has been noted during the year 2016 will be available at the end of the year, but based on the indicators for the first quarter, the house prices in Spain rose by 6.34%. It is predicted that the total increase of prices for the entire year will be up to 5% for the current year. Since the local economy is expected to grow even more in the upcoming years, the experts predict that this will have a positive impact on the Spanish property market, so the upcoming years should bring even greater increase in the property value. The demand, which is expected to increase as the economy becomes stable, is mainly going to affect the increase in property value.

International buyers

Spanish properties remained mostly popular among buyers from Britain, as approximately 20% of international buyers were from the UK in 2015. However, the impact of Brexit remains to be seen, as the British buyers are more likely to be more cautious with property investment now that the country is leaving the EU. The real estate experts predict that this will have a large impact on the Spanish property market, as the British buyers were the main buyers of the Spanish properties over the past years and they comprised a significant percentage of the foreign property investment. However, the fact that Brits may be more reluctant to buy might lead to the increase of other international buyers, who although less prominent on the market in the previous years, are still important part of real estate market in Spain. Investments from French, Germans, and Swedish buyers, each accounted for about 6% to 7%, as well as from other international buyers. These international investments are supposed to support the predicted growth of the local economy and the rise of the property market.

Popular areas in Spain

Spain is geographically divided in several areas, each of which is differently developed and each one having its own characteristics making it more or less desirable for property investment. The most popular areas in the country are urban areas with Madrid and Barcelona recording the highest increase in property value. Since these areas are highly populated with developed infrastructure, these are the most popular areas where buyers are looking for properties to invest. The second popular area based on property investment includes coastal areas with the Balearic Islands reporting the highest increase in property value. Since a lot of foreigners are looking to buy their second home in Spain, they prefer coastal area as this is a perfect location for buying a summer home. As a result, the islands, as well as the coastal area of Barcelona are particularly interesting for buyers who want to buy a property allowing them to spend holidays in the areas with great climate and a lot of sun throughout the year.

Reasons for such popularity of Spanish properties

Foreign demand for Spanish properties continues to rise, leading to the number of transactions rising and the market recovering from the crisis. Even before the crisis, the Spanish property market reported high level of demand in comparison to other European countries, and there are several reasons why Spanish properties are so popular among international buyers.

Golden Visa scheme

This legislation was adopted in 2013 and it states that any non-EU national bringing more than EUR 500,000 to invest is automatically granted a Spanish residency permit. This became a great convenience for foreign investors, who saw this as an opportunity to make the process of purchase much easier. While the EU investors, who were the primary buyers, saw no additional perks from this legislation, it did bring more investments from other international investors such as those from China and Russia.

Low interest rates

The main reason for the market boom present up to 2007 were the low mortgage interest rates, that were dropping from 17% in 1991 to less than 3.5% in 2004. These are arguable some of the lowest mortgage interest rates in Europe. The period after crisis when the government was trying to recover the economy reported even greater decline in mortgage rates. In April 2016, the average mortgage rate in Spain stood at 1.41%, according to the European Central Bank.

 

Prospects for the future

It is evident that the latest two years brought stability to the Spanish property market. The demand is up, especially when it comes to international buyers, the demand on mortgage is also growing and the prices of the properties are stable or rising. This creates a positive situation on the market, providing additional security for all those who are interested in investing. As the country’s economy started to recover and the recession started to decrease, the economy is expected to grow in the upcoming years, which will affect construction industry and further lead to decrease in the unemployment rate, which is still very high at this point. The national reports still note a large number of unsold properties, but those are mainly located in the areas where the properties have never been so popular, but it is predicated that further development of the regions will improve the situation even in these areas. This oversupply of properties is noticeable only in areas such as Almería, Cuenca, Toledo, etc., but experts predict that the situation is supposed to get better by the year 2018.

Properties in Spain based on popularity

Finally, we would like to conclude this guide about Spanish property market with a visual chart of the most popular properties in Spain. The red dots are the most popular areas, which are obviously the most expensive areas when it comes to property investment. These include urban areas around the large cities, as well as the coastal areas and the islands. The yellow dots represent the least popular areas to invest into property, but those are the areas offering the cheapest property value, which might still be a great investment opportunity for someone who has a limited budget but seeks to invest into a property in Spain.

Image source: http://www.telegraph.co.uk/property/abroad/mapped-where-to-find-spains-cheapest-property/

 

Statistic data source: http://www.globalpropertyguide.com/Europe/Spain/Price-History

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