Prices bottomed out in 2015 and modest price rises were seen in some locations in 2016, as investors chased bargain Spanish property. Property sales recorded a 15% rise on the previous year and have now seen 10 consecutive quarters of growth, so the Spanish property market crash has officially ended. 2016 saw a turning point as the recovery continued and price increases moved beyond the big cities such as Barcelona and Madrid and the more desirable locations. The growing economy, the return of mortgage credit and low interest rates/financing costs, potential for better rental returns and capital appreciation should continue to drive sales upwards throughout 2017 and beyond.
Demand from international buyers is key to a Spanish property market recovery. It remains to be seen if in a fall in British interest results from Brexit, as the British are the largest investors looking for property bargains in Spain. Brexit had a noticeable effect on sales to British buyers in the second half of 2016, perhaps due to the depreciation of the pound rather than concerns about the country’s future in Europe. Second home buyers from the UK may hold off until there are firm indications of what will happen once the UK begins the formal process of leaving the EU which starts with the triggering of Article 50 before end of March 2017 and the impact this might have on Sterling. Brits still dominate foreign sales of bargain Spanish property with nearly a fifth of the market, more than double the French. There could still be pent-up demand from potential British buyers, as searches for Spanish property reached all-time highs after the referendum vote in June, up over 50% on 2015. Older British home owners with no mortgages, looking for a holiday home may be tempted to buy in Spain. British buyers age 50 plus are sitting on huge equity piles and Brexit didn’t diminish their wealth. Yes, they may be getting richer but they still haggle over prices and want to get value for their money! Another factor, not often considered, is that the GOLDEN VISA program, whereby non-EU citizens who invest in Spanish property to the value of a minimum of € 500,000 will immediately qualify for a Spanish Visa, and after 10 years can apply for a Spanish passport which is of course also a European passport, thus allowing freedom of access and movement to all EU nations. This may prove attractive for some British citizens who will of course no longer have European passports after Brexit as well as to international investors especially from China, the Middle East and the USA.
Demand for Spanish property from other foreign buyers, including from the United States and the Middle East, should continue an upward trend throughout 2017. Diminishing demand for high end homes in London following Brexit could also see non-EU citizens look to Madrid or Barcelona instead. Valencia is set for a splurge of new builds in 2017, signalling that developers expect strong demand there.
Demand is also expected to rise on the Costa Brava, especially in traditionally sought after coastal villages. However, prices could fall further in Marbella and the Costa del Sol, as developers reach out to foreign buyers looking for Spanish property bargains. The noticeable increase in new and off-plan projects is leading to increased competition and developers are increasingly focusing on prices, payment terms and value for money for punters looking for property bargains in Spain.
Almeria's prospects look good as it is relatively cheap and its traditional charm attracts overseas buyers. Sales were up year on year by 93% in 2016 and with an average price of €129,000 (around half the national average) properties are seen as good value.
Prices are also lower on average in Alicante where international buyers have more property than in any other province in Spain. It’s attractions for investors are not just the fabulous beaches, but prices up to 15% below average and steady sales growth.
Tenerife is also on the spotlight as far as overseas buyers are concerned with Italian buyers overtaking British buyers for the first time as the main group of international buyers. Prices are already increasing, up 5% to an average of €249,000 in 2016 and low cost flights from around Europe make it popular with those looking for a holiday home that they can also let out.
Spain’s property market has nowhere to go but up. The 2008 crisis devastated the housing market but Spain has incredible international appeal, especially with British, French, German, Dutch, Belgian, Italian and Swedish buyers.
However, the hunt for Spanish property bargains points to a key trend in the market in 2017 with buyers seeking good value properties that can for example offset the drop in Sterling’s value. Evidence is already emerging of the benefits of this on lower priced destinations, which look set to boom in 2017.