While the Spanish economy is still having some difficulties, property transactions have increased by 20% in a year. Property prices are not uniform right across all areas of Spain, however, property prices in coastal areas and in prominent Spanish cities look set to recover significantly during 2015.
Investors should bear in mind various factors when considering buying properties in Spain. Spanish property prices have not performed spectacularly but prices have increased by 1% in the last ten months, and are 2% higher than those in 2012. This is against the background of plummeting prices since the financial crisis, the financial crisis deterred overseas investors and Spanish investors were thin on the ground. All these factors meant that the well-known coastal areas and major cities were much more badly affected than other areas.
The 1% property price increase is unspectacular and would not normally indicate a recovery in the market. The increase in the number of transactions seems a more compelling indication and when coupled with the 1% rise in prices would seem to be a positive signpost towards recovery.
We spoke to Eduardo Diaz, who has an agency that deals with property for sale in Javea, a beautiful town in the Costa Blanca. “The problems in the Spanish property market began during the 2008/9 economic crisis. A large number of long term property developments entered the market at a time when there were few investors due to the financial downturn and resulting uncertainty. The supply of new property to the market had been too high for years but overseas investors had previously helped to mop up this excess supply,” said Diaz.
The most recent figures show pre-owned property sales up by 44% and new property sales 19% down. A decrease of 19% in new property sales would in more normal times worry investors, but in these times, merely shows that the excess supply of new property is being reduced. The smaller growth in numbers of properties for sale in Spain concentrated investors’ minds and there is increased demand.
Spanish mortgage rates are now among the lowest internationally and these low rates have led to the spectacular 29.8% increase in the number of mortgages during September 2014. Spanish government measures to assist expatriate investment in property have assisted in supporting property prices and given a little stability to prices. These measures cannot be permanent and their impact can only affect the market in the short term.
The current economic turmoil within Greece, and the uncertainty as to Greece’s future relations with the EU and the euro may also affect the Spanish property market and the Spanish Authorities have no control over this particular situation. The current United Kingdom government’s misgivings over immigration, free movement of people and other aspects of the EU and the rise of anti EU parties in other member states certainly means uncertainty, which is not good for any investment market and could mean more instability in the EU and may thus have negative effects on the Spanish property market. There are encouraging signs in the Spanish property market but it is necessary to consider all factors when looking to invest in that market.