Spain suffered one of the world’s worst coronavirus outbreaks, with over 250,000 cases and more than 28,000 deaths so far. The economy, which relies heavily on tourism and real estate, contracted 5.2% in the first quarter.
The economy is getting back on its feet but, according to Lola Alcover, secretary of the General Council of the Official Associations of Real Estate Agents of Spain it will be a fairly slow one.
"We anticipate a U-shaped recovery of the economy which won't be very steep, meaning we could be back to 80-90% of pre-COVID levels by the end of 2021," she explains.
What about the Spanish property market? What evolution do analysts observe?
The latest price data for Spain by idealista makes for unsurprising reading. Across Spain, year-on-year prices to the end of June 2020 have fallen by 4.8% to €1,650 per square metre, the first annual decrease since February 2017.
Prices are now 19.6% lower than they were in June 2007, close to the peak, but still 5.6% higher than they were in June 2014, around the time of the property turnaround. Looking at the key regions, property prices are down by 7.3% in Catalonia to €2,092 per square metre, 3.2% in Madrid Community to €2,737 per square metre, 1.8% in Andalucia to €1,571 per square metre , by 1% in the Canary Islands to €1,784 per square metre and by 3.6% to €1,331 per square metre in the Valencian Community in the year to the end of June 2020. The Balearics was one of the few key regions that registered an annual price increase – of 2.4% to €3,087 per square metre.
Spain’s National Institute of Statistics (INE), which has a different price index, recently reported that property prices grew at their lowest rate for five years during the first quarter of 2020, before the real impact of Covid could be felt. Their data showed that property prices rose by 3.2% in the first quarter compared with the same period in 2019 - its lowest increase since 2015.
With regards to the volume of sales transactions, data is only available until the end of Q1 2020, also before Covid had taken hold. However, figures show a market that was already contracting. There were 138,374 sales in Q1 2019 and 116,070 in Q1 2020, a decrease of 16.12%. With regards to regions, notable decreases could be seen in Andalucía (15.57% decrease), Málaga Province (13.52% decrease), the Balearics (23.55% decrease), the Canary Islands (16.76% decrease), Catalonia (16.15% decrease), Barcelona Province (17.31% decrease), the Valencian Community (11.89% decrease), Alicante Province (11.65% decrease), Valencia Province (13.35% decrease) and the Community of Madrid (20.19% decrease).
Now that buyers are welcome again, one thing the property experts agree on is that prices will not go up in the near future. Forecasters believe that there will be a decline of between 10% and 15% on average, with the possibility that in some of the most affected areas, price drops could reach a 20% drop whereas more prosperous areas may see drops below 10%.
Locations where prices are expected to fall the most in the coming months are second home areas, coastal regions and areas with higher unemployment. Some forecasters predict city centre areas with dense populations could also see significant drops as interest increases for homes in the suburbs where buyers can choose more spacious properties with outside space for the same price or less.
"There will be some downward price adjustment as housing supply increases” explains Martin Posch, Chief Operating Officer of Fastighetsbyrån Overseas. “But I don't think we should expect any dramatic falls similar to those during the financial crisis.” Posch points out that the increased supply can also create unique buying opportunities. "That dream home with a terrace facing the sea, which was previously sold within the family, may now be on the open market. So it's definitely time to keep on your toes as a buyer. Then, as usual, this advice always applies: buy something you really want to live in, not just because it is cheap.”
Agencies such as Fastighetsbyrån have seen a noticeable increase in interest from foreign buyers in Spain again, now that the travel restrictions – in most cases – have been lifted.
"One of the few advantages of recent months is perhaps that many have had the opportunity to review their life situation and economy in peace and quiet. They have had the opportunity to evaluate what is important and talk together about how they want to live in the future. Now we can make home visits again, we can offer video tours to buyers. Although buyers don't always make a purchase decision right away, it's a great way to filter what you do and don`t want." Adds Posch.
On the other hand, if you already own a home in Spain or Portugal and are thinking of selling, Mr. Posch has a clear piece of advice – do not wait.
"There is no need to wait and see, prices will in all likelihood not go up in the near future. Instead, it may be wise to act quickly. Try a small price cut, before the rest of the market does. Then it will be easier to get a quick deal. There is a greater risk of waiting and following a market that is contracting as you risk selling at a lower price than you had initially imagined."
Martin Posch’s tips for buyers and sellers in Spain:
• Monitor the housing market. Many homes that were previously off the market are now being listed on the open market.
• Buy something you really want to live in, don't buy just because it seems cheap.
• Take advantage of the opportunities for digital viewings, to get a feel for different types of homes.
• If you are thinking of selling, do not wait. Act quickly and make a small price adjustment. You can benefit from that in the long run.
• If you are unsure how to act in the market, then get help from a recommended brokerage agency.
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