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August

Buying property in Spain is on the up

Published: Wednesday 01 August 2018

Spanish mortgages and real estate sales are rising. The number of homes in Spain bought by mortgage finance rose 7.3% in the year to May 2018, official figures show.

Spanish mortgage values up 2.8%

At the same time, the average value of the loan rose 2.8% to €117,044, the data from the Instituto Nacional de Estadistica (INS) – the national statistics body – shows.

Home sales rise 5% in Spain – but big fall in Balearics

This comes on top of a 5% rise to 42,708 in registered home sales across the country in May 2018, although sales in the Balearic Islands fell 27%, due to concerns over the political unrest in Catalonia, which has strong ties to Majorca and Minora.

Actual sales during May reached 51,896, according to figures from the Spanish Notaries’ Association, a 7.7% annual increase in the number of Spanish home sales and purchases.

More than 31,000 Spanish mortgages

There were 31,166 mortgages taken out according to Spanish property records in the 12 months to May 2018. In total, €3,647.8 million capital is involved, a rise of 10.3 year-on-year.

Four in 10 loans fixed-rate

More than four out of 10 loans were fixed-rates. The average interest rate is 2.62%. That is 0.05% lower than in April 2018 and the lowest in the last year. The average fixed rate is 3.04%.

Huge loan rise in Canaries

The biggest monthly rise in mortgages for properties in Spain’s autonomous communities came in the Canaries, with a huge 85.9% rise from April 2018 to 1984 mortgages, a significant annual increase of 70.9%. Next came Pals Vasco on 34.1% in the month and Comunidad Foral de Navarra up 29.7%.

Rental property values up 2.4%

The latest data from Spanish real estate specialist, Idealista, shows that the price of rental housing increased 2.4% during the second quarter of 2018 to €10.8 per square metre per month.

‘No bubble’ in rental market

Fernando Encinar, head of research, says, "It is true that we are experiencing a generalized increase, but in no case can we speak of a bubble, since by definition these only occur when an asset is purchased and not when it is leased.”

There will be areas and streets of the big cities where the price will continue to rise, because supply is scarce, he adds.

Highest rise in Murcia

Prices rose over the quarter in all autonomous communities except Catalonia, where rental income for rental housing fell by 0.2%.

The highest increase was in Murcia, where values rose 8.5%. It is followed by La Rioja (8.4%) and Navarra (7.7%). Behind are Cantabria (6.4%), Baleares (6.1%), Comunitat Valenciana (6%) and AndalucĂ­a (4.9%).

Use an independent lawyer when buying

Meanwhile, people planning to buy a property in Spain and other properties abroad are being urged to use an independent lawyer – and a different one from the seller. 

With summer holidaymakers returning from their vacation and thinking of buying property in Spain and other countries, UK-based overseas property professional and financial advisor, Simon Conn, has seen rising enquiries.

Do not rely on same lawyer as seller

There are real benefits of using an independent overseas lawyer rather than the same party as the seller, or just relying on a local Notaire – a qualified lawyer who is licensed to witness signatures on documents for use abroad.
 
Costa Brava, Rosas, Catalonia, Spain property - Halo Financial
 
Buyer and seller want different things

Simon Conn explains, “When you purchase a property in the UK, you would always use an independent lawyer rather than using the same lawyer as the seller. This is for several reasons. First of all, a solicitor cannot act in the best interests of his client if he is acting for both sides. The buyer and seller want different things from a transaction and if one lawyer acted for both he cannot do the best job he can for either of them. The lawyer in those circumstances would be torn between his obligations to both sides and a conflict of interests would be present.

Avoid potential conflicts of interest

“In the UK, a solicitor is prohibited from acting for both sides of a transaction due to a potential conflict of interests and their inability to act in the best interests of either party. The same principles apply when buying a property abroad, no matter what people tell you. Even if the law in the other country allows a lawyer to act for both sides it does not make sense to use the same lawyer as you want somebody who is acting in your best interest rather than also looking after the interest of the other side,” he added.

Myth that you don’t need a lawyer

“Some countries use the Notarial system and it is sometimes thought that you do not need a lawyer to act for you in a purchase if using a Notary. This myth is perpetuated by agents who either do not understand the role of a lawyer or are worried that a lawyer may get in the way of the sale and therefore their commission. The Notary does not, generally, get involved in a transaction until the end. Their role is normally to witness the title deed and, in some cases, to register the property and to make sure that the taxes are paid,” Mr Conn says.

The role of the Notary is different to your lawyer

“The Notary would not tend to get involved in all those things that need to be done before you get to the stage of signing the deed, such as searches on the property, drafting and approving the contract, arranging things like power of attorney and any number of other things that may crop up before completion. Getting the Notary involved is the last stage of the transaction, not the whole thing.

Why problems occur buying property in Spain

“Generally speaking the cases that we see where there is a problem with the property are where the purchaser did not have an independent lawyer, or worse still did not use a lawyer at all.”

Institutional property investment up 165%

Meanwhile, institutional investment in Spanish residential property volumes reached €2.6 billion in 2017, a 165% annual increase, according to a report from leading international real estate specialist, JLL.

Rising forward and land deals in Spain

The total was up from €960 million in 2016 thanks to increasing forward and land deals.

More cities with multiple transactions

Although Madrid at €1.1 billion and Barcelona on €600 million dominated the institutional investment market, although their share fell as new cities emerge. Multiple transactions were recorded in Malaga, Bilbao, San Sebastian, Valencia, and Seville.  

There are now over 20 residential REITs active in Spain with combined volumes of over 20,000 units under lease. The largest include Testa Residencial, Blackstone and Sareb.

Foreign investors boost land deals

Investor demand for prime residential development land continued to grow across Spain, particularly from foreign investors. A lack of zoned development land, particularly in Madrid, has frustrated developers as they try to take advantage of the improved market conditions.

You can also keep up with the latest news on property abroad and how it affects the currency markets in our informative news section.

If you are thinking of buying property in Spain, get in touch or read Halo Financial's guide to buying property in or moving to Spain.