The current pandemic is causing an impact in every sector of industry in Spain and real estate is no exception. Just six years after the country emerged from ‘La Crisis’, it has been thrown another curveball. Despite the current restrictions, most agents will concur that there is fluidity for both supply and demand – sellers are putting homes onto the market and also investors are looking for opportunities. But who currently has the edge? The buyer or the seller? We assess the current situation.
Looking at the property prices in Spain, the current recession hasn’t (so far) had a significant impact.
Prices across the whole of Spain decreased very slightly year-on-year to August 2020, by 0.8% to €1,735 per square metre, according to Idealista. They are currently 14% lower than they were in August 2007, around the time of the peak, and are 12% above the average prices in August 2014, generally regarded as the time when prices bottomed out.
Taking a look year-on-year prices to August 2020 for three of Spain`s key regions for foreign buyers – Málaga Province (which includes the Costa del Sol), Alicante Province (which includes the Costa Blanca) and Barcelona Province, Málaga showed an increase in prices of 3% to €2,225 per square metre, Alicante’s prices went up by 1% to €1,582 per square metre and in Barcelona Province prices fell by 1% to €2,670 per square metre. Barcelona city’s prices fell by 4% to €4,039 per square metre.
Málaga’s property prices are currently already 11% above those of the peak prices of August 2007 whilst Alicante and Barcelona average 9% and 2.5% below the average of thirteen years ago. They are all well above the average price of mid 2014 – by 41% (Málaga province), 25% (Alicante province) and 32% (Barcelona province).
Looking at the change during the period Q1 2020 to Q2 2020, when Spain was in lockdown or with restrictions of movement, prices across the whole of Spain went down by 6%. In Barcelona Province, prices decreased by 4.5%, in Málaga Province by 0.23% and in Alicante Province by 0.83%. In the city of Barcelona itself, prices actually increased during this period, by 1.3%.
Looking at July compared to August, property prices went back up again across Spain by 3.5% and also increased by 1.3% in Málaga Province, by 2.3% in Alicante Province and by 2.9% in Barcelona Province. In Barcelona city, prices decreased, by 1.1%.
The slump in the volume of sales across Spain and key regions has been more noticeable. According to Spain’s National Institute of Statistics (INE), year-on-year, transactions in Spain went down by 43% in the second quarter of 2020 to 74,657 transactions. Sales across Spain from Q1 2020 to Q2 2020 slumped by 41%, suggesting that the decrease in sales numbers was overwhelmingly due to lockdown. This pattern is reflected in the provinces of Málaga, Alicante and Barcelona, which saw sales decrease by 43%, 46% and 31% respectively from the first to second quarters of the year. But this is no surprise given that agents and clients were unable to physically view homes during this period.
Spain’s economic slowdown is currently the worst in the Eurozone. The country is now in recession, having endured two consecutive quarters with negative output. In Q1 GDP fell by 5.2% and in Q2 (when the country was in lockdown), the economy contracted by a massive 18.5%. The slump is expected to continue into Q3 and Q4 2020. Spain was particularly badly affected due to its reliance on tourism and services and people were also confined to their homes in one of the world’s strictest lockdowns, restricting spending and movement.
There is some good news on the horizon, however. The Bank of Spain predicts growth of 9.1% in 2021 and the EU has offered Spain nearly €140 billion in grants and loans, subject to structural reforms, which will help kickstart its economy. After some analysts initially predicted that Spain would see a V-shaped economic recovery, most now concur it will be U-shaped with the upswing starting early in 2021 when many believe that a vaccine for Covid-19 could be in circulation.
No-one is predicting a crisis like that of 2008, given banks and households have much lower debts and there is no oversupply of homes as was the case twelve years ago. The only potential sticking point is if interest rates go up, which most analysts believe is unlikely.
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