In terms of sales, prices and transaction volumes, Spain’s property market is recovering although the rental sector is not performing as well. In February 2016, the average rent fell by 0.3% compared to the same month of 2015, according to the latest data from the National Statistics Institute.
This marks the 35th consecutive month of declines although the outlook is far from negative due to rents falling considerably less than the consumer price index which recorded a 0.8% decline in February this year.
A breakdown of the figures show that all regions saw rents decline apart from Galicia, the Balearics, Navarre and Catalonia with slight rises of 0.3%, 0.3%, 0.1% and 0.1% respectively, while rents in Murcia were unchanged.
The biggest decline was in La Rioja with a fall of 2%, followed by Castilla y León and Castilla La Mancha both down 0.9%, Madrid and Extremadura both down 0.8%, the Basque Country down 0.6%, Asturias and Cantabria both down 0.5% and Valencia down 0.4%.
Overall Spain’s property market has been buoyed considerably by increased activity from foreign buyers. The Spanish Ministry of Public Works reported that 69,196 homes were sold to foreigners during 2015, representing an increase of 13% over the previous year. 17% of the property sales taking place throughout last year involved buyers from Europe and beyond, accounting for almost one in every five of the homes sold in Spain in 2015.
Non-resident foreigners purchased a total of 4,846 homes in Spain last year, up 10.1% over a year earlier, while resident foreign buyers bought 64,350 homes, an increase of 13.3% compared to the previous year.
Valencia was the top region for foreign buyers in 2015 with a total of 20,219 homes sold to foreign buyers, followed by Andalucía with 14,384 and Catalonia recording 10,264 sales to foreigners.
Research from boutique overseas real estate agency Ideal Homes International has found that resales now account for 76% of sales to British buyers although there is still interest in new properties from Scandinavian and Belgian buyers.
According to director Chris White many British buyers are looking for dual purpose properties. In the immediate term they want a holiday home that also has the potential to earn income as a holiday let. In the longer term, they want somewhere that can act as investment for their golden years, either as somewhere to escape to for a life in the sunshine or as somewhere that will grow their capital so that they can sell it to fund their retirement.
‘There was a time when British buyers flocked to new build developments in Spain. The financial turbulence of the past decade has had an interesting impact on British property purchases in Spain. Confidence is back and the market is growing at a healthy pace, but the type of property that buyers are seeking has definitely shifted,’ explained White.
‘The attractions of new homes have given way to the warmer appeal of more homely properties. Location is key too and buyers are focused on the closest airport and beach, the nearest shops and other local amenities,’ he added.
British buyers have contributed the most to a steady growth in foreign demand for property in Spain as the housing market remains stable, once again the biggest group of buyers by a large margin. During 2015, 9,956 property purchases were registered to British buyers, representing 21% of foreign demand last year, followed by the French with 4,116 or 9% of the market share and the Germans with 3,445 (7%).
According to Mark Stucklin, of Spanish Property Insight, what is remarkable is how much British demand surged in the last two quarters of 2015, which was not the case with other nationalities. Russian demand declined steadily throughout the year. He said that in both cases the change was influenced by exchange rates, with the pound strengthening and the rouble weakening.
‘The big story from last year’s foreign sales figures was the 81% increase in British demand compared to the year before. The British are clearly back to being the dominant force in foreign demand, though not yet as dominant as they were in the boom years,’ Stucklin explained.
‘Low Spanish property prices, down around 50% from the peak, plus a stronger pound are no doubt fuelling British demand,’ he said but pointed out that fears of the UK leaving the European Union following the forthcoming referendum vote in June creating uncertainty about the UK’s future in Europe, and a weaker pound in the short term, could encourage British buyers to sit on the sidelines for the next few months.
‘So don’t be surprised if British demand is significantly down in the first quarter of this year when the figures come out,’ he added.
At the other end of the scale Russian demand was hammered last year, down 43%, thanks to serious economic problems at home pushing the rouble down around 16% in the last year, and 50% in the last 3 years, leaving many Russians considerably poorer.
The Basque Country remains the most expensive region for resale properties, with an average price per square metre of €2,550, followed by Madrid at €2,371 and the Balearic Islands at €1,900.
In contrast, the regions with the most affordable housing in February were Extremadura at €955 per square meter, Castilla-La Mancha at €968 and Murcia at €1,057.
Despite the fluctuation in property prices according to location, Spain’s residential real estate market has achieved stability. The latest index from the Housing Department shows house prices rose 1.8% last year, the first time this index has finished a year in positive territory since 2007.
While the latest index from appraisal company Tinsa shows average national prices were up 2.7% over 12 months, and by 6.1% on the coast, and 2.5% on the Balearic Islands and Canary Islands.
The stability achieved in Spain’s property market reflects the economic progress the country has made in recent years. With a consistently improving economy, a booming tourist sector and a favourable borrowing climate, the outlook for Spain in 2016 is extremely bright.
Main image: An artist’s impression of the Los Lagos R22 development on Spain’s Costa Blanca ©Patrimi Resorts S.L.