The Spanish property market has long been considered to be one of the most buoyant in Europe. However after five years of continual growth, in Q2 of 2019, sales figures contracted for the first time. But what does that mean in real terms? And how will it impact individuals thinking of buying property in Spain right now? Here is a full break down of the figures, and what we think they mean to you:
Understanding the Numbers
The property market across the whole of Spain contracted by 7.8%. This was caused by a slump of sales in 12 of Spain's autonomous regions, with overall house sales in the Balearics particularly significantly impacted, with a drop of an incredible 20.8%. Sales were down in 11 other regions too, which can be broken down as follows:
Madrid ( down by 17.6%), Canaries (down by 9.4%), Andalusia (down by 8.9%), Asturias (down by 8%), the Valencian region (down by 7.2%) and Catalonia (down by 5.9%). The only region that saw an increase in the number of sales during this quarter was Murcia, where sales were up by 2%, whilst the sale numbers in Galica were largely unchanged, recording a modest increase of 0.8%.
It’s not all bad news though – despite a decline in the number of sales, house prices continue to increase, particularly in areas where overseas buyers choose to either invest or relocate. For example, despite the huge drop of sales in the Balearics, house prices were still up by 6.2%. According to local estate agents living on the island, this anomaly is due to an acute shortage of homes for sale on the islands, meaning that those homes that are listed for sale remain in high demand. In other parts of Spain it is considered a buyers market thanks to the large number of properties that simply aren’t selling, meaning that the decline could actually be considered good news for first time buyers, or those that are entering the market without a property to sell in the country (such as ex-pats).
What’s Causing the Decline?
There are many factors that are contributing to the decline in property sales throughout Spain, many of which are region-specific, and others of which will affect the whole economy and housing market. These factors include:
- Political instability in the country, particularly in the Catalonian region, which remains one of the biggest housing markets in the country.
- Brexit having a negative impact on property demand from British buyers, with many people now waiting to see what impact Brexit will have before making the move to Spain.
- General weakness in the global economy, which will impact the property market worldwide.
- Rising unemployment levels in Spain having a negative impact on the wider economy in the country.
- Problems and perceived problems within the Spanish property market itself. These are long term issues and include a lack of transparency in the industry continuing to deter potential buyers, alongside high transaction fees and unprofessionalism amongst some, lesser established, agencies.
- Investors, and particularly overseas investors, being deterred by Spain’s strict and draconian tax and rental laws.
Will the Spanish Property Market Collapse?
Whenever there is a contraction of the property market, one of the first questions that many people ask is whether or not the property market will collapse. To ask this about the Spanish property market now would be far too previous: after all, we have only seen contractions over one quarter, after more than 5 years of growth. There is no reason to believe that the property market won’t recover from these losses over the next twelve months.
With property prices remaining buoyant, this is a good sign that the market is set to recover from this set back quickly. The region remains popular with ex pats. Investor confidence is a very real concern whenever there is a property market decline, but for the ordinary property owner looking to relocate or invest in a new home, there remains no real reason not to continue with your property search.
Are you thinking of relocating to the Costa del Sol? Despite wider market uncertainties, the property market here remains buoyant, and there are a wide variety of wonderful houses on the market in the region. Why not get in touch with our property experts who can use their skills and knowledge to help you turn your Spanish dream into a reality.