How Has the Virus and Brexit Affected Spanish Property Prices?

Spanish homeowners across the nation are sure to be worried about the duel pronged attack that both the Coronavirus and Brexit will have had on the value of their property. And if you’re looking to buy or sell a home in Spain in the next 12 months, that concern is sure to feel even more poignant. But whilst there have been some declines in the property market, which have been widely discussed in the media, the reality is that the long-term forecast isn’t all doom and gloom. In fact, even the most conservative forecasts don’t expect that property prices will drop by more than 10 percent, and the foreign resales market is expected to bounce back much faster than any other aspect of the country’s real estate offering.

Here, we will analyse further the forecasted impact that both the Coronavirus and Brexit will have on Spanish property prices:

Despite Brexit, Spain Remains Highly Desirable

Firstly, the good news: despite the UK’s decision to leave the EU, the Spanish property market remains a highly desirable offering to Brits. During the period between December 2019 and January 2020 (after Brexit was officially a done deal) Britons were the top buyers of Spanish properties across the country. What we can summise from this is that, whether Briton is part of the European Union or not, the lure of Spain’s sun, sea, and thriving expat community remains irresistible.

During 2019, the property market saw significant activity amongst the British market, as some sought to purchase property before Brexit was finalised, and others sought to sell their property and return to the UK due to the uncertainty that Brexit brought. This uncertainty was largely driven by a lack of communication between the UK and the EU, and the worst of this is over, now that we are beginning to have a clearer idea of what a post-Brexit world will look like for Brits living in Spain. During this process, Spanish property prices have increased year on year.

Britons accounted for 14% of foreign market share, the largest percentage of foreign homeowners in the country, and it is not expected that this figure will change significantly as a result of Brexit.

Coronavirus Will Cause Property Price Drops

One fact that can’t be avoided is that Coronavirus will have an impact on property prices, not just in Spain but across Europe and, realistically, the world, at least in the short term. Spanish banking experts UBS and Bankinter have both forecast that Spanish property prices will drop (with an average decline forecast of 6%) although the impact is expected to be felt least in city locations, where the demand for property will remain high, due to the consistent property demand in heavily populated locations.

Whilst property price drops can seem scary, and make great headlines, it is important to remember that these actually follow significant long term price increases year on year, meaning that in real terms the drop will not be as significant as the statistics indicate. Of course, in the short term, supply and demand will drop in ways that are unprecedented: whilst people are locked down in their current homes they will be unable or unwilling to visit other properties to start the sales process. Due to this we are sure to see the lowest drop in the number of sales and purchases for the period March 2020-May 2020 that the country has ever experienced. But as soon as lockdown is over, this trend should reverse as quickly as it started.

If you’re looking to get on the Spanish property market for the first time, the drop in Spanish property prices could work to your advantage. Bankiter believe that the effect of the Coronavirus property drops will bring housing costs better in line with salaries in the country, which will in turn rebalance the housing affordability ratio. Young buyers who felt that property purchase was out of reach may now be in a position to take their first step on the property ladder, in turn ensuring that there is a pool of potential buyers for those looking to sell their properties.

The Market Will Recover

What goes down must come back up, and it is important to remember that whilst global property markets will take a hit as a result of the Coronavirus crisis, they will recover. Conservative estimates suggest that we can expect the Spanish property market to recover by 2021, whilst other areas of the Spanish economy will begin their recovery this summer, but this forecast is based on so many unknowns: when will tourists return to Spain? When will foreign nationals return to their holiday homes? It could well be that, if the number of Coronavirus cases continues to drop or if a vaccine for the virus is developed, that we will see the property market recover much faster than these global forecasts. International momentum in the Spanish property market will certainly develop much sooner than domestic momentum, once those enthusiastic foreign house buyers are able to return to the country.

 Are you thinking of either buying or selling your property in Spain? Looking to move on to pastures new, either in the local area or further afield? Why not let our local property experts help you? With years of industry experience, we’re ideally placed to help you make your property sale, purchase (or both!) as simple and stress-free as possible. Get in touch today.