Foreign demand for property in Spain is increasing in the post-covid world, but it is still 16% lower than it was before the pandemic. This makes perfect sense, given that many foreign buyers are still unable to travel to Spain due to travel restrictions as a result of the coronavirus pandemic. But will foreign demand increase when the pandemic is over? We do know that local demand has already recovered to its pre-pandemic levels, but what factors will lead to the recovery in the growth of foreign demand?
Foreign Demand for Properties in Spain
Whilst it is clear that foreign demand for properties in Spain plummeted during the pandemic, the reality is that it was already declining before the pandemic hit. This downward trend began in 2017 and continued until 2019, coinciding with the UK’s decision to leave the EU. However, it’s not all doom and gloom: in the second half of 2019, when the regulations surrounding Brexit had become clearer sales to foreign buyers were increasing and there were signs that the market was recovering. It might well have recovered fully by this point, if the pandemic hadn’t hit. Covid is such an unprecedented crisis that it has blown all other trend tracking out of the water.
Local Demand for Properties in Spain
What is interesting to note is that in 2018, local demand for properties had also begun to decline and, just like foreign demand, also saw a recovery during the second half of 2019 before nosediving as a result of the pandemic. But as the impact of the pandemic has eased, local demand stopped following the same path as foreign demand, with foreign demand recovering much more slowly. Here we will assess some of the reasons for this:
Property Prices in Spain
For many years after the infamous Spanish property crash, property prices in the country sat at an all time low. This means that, if you were prepared to take a bit of a risk, you could secure a property for a bargain price. However from 2014, Spanish property prices began to grow sharply, and by 2017, they had returned to their normal ‘pre-crash’ levels. This meant that many people hunting for bargain properties simply weren’t able to find them and were priced out of the market.
The Brexit Affect
Brexit has had a huge impact on Britons buying property in Spain, and across wider Europe. The UK was the biggest foreign market for Spanish property, and the uncertainty that surrounding the process meant that many British buyers temporarily put their property hunts on hold.
The Impact of Interest Rates
After mid 2018, interest rates in Spain started to increase again, after falling into negative territory from 2014 to 2018. This meant that mortgages in the country were more expensive. But one silver lining of covid is that those interest rates have fallen significantly again, and this will help to stimulate demand in the market, and make right now a very sensible time to invest in property in the region.
2017 and 2018 were difficult times for Spanish politics, with the country making the headlines due to the constitutional crisis in Catalonia and the huge amount of political stability in Madrid, which proved to be a long-term issue for the country. This led to bad press and an unsettled atmosphere: both things that would drive away foreign buyers. However, by 2019 the political situation had stabilized, the news looked better, and buyers were beginning to return: until covid came along and stopped everything in its tracks once more.
What Happens Next?
It wouldn’t be fair or realistic to say that the coronavirus pandemic is the only crisis that the Spanish property market is facing in 2021. The increase in house prices, the impact of Brexit and other factors will also influence buyers decisions, even after travel restrictions are further eased. On the flip side though, the much calmer political situation in the country and the lower interest rates should serve to help Span entice more foreign buyers back to its shores: and why wouldn’t they come? There’s a lot to attract you to Spain, and to the Spanish property market.
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