Coronavirus: The effect on the Spanish property market
Before coronavirus rattled the Spanish economy during 2020, Spain’s property market was in high demand. For many foreigners, it is a popular destination due to its Mediterranean climate and thriving ex-pat community. Studies showed that Britons were the top buyers of Spanish property across December 2019 and January 2020.
However, whilst growth in the Spanish property market came to a halt during Spain’s first coronavirus lockdown, demand began to rise with the easing of restrictions. The summer months led to significantly higher numbers of virtual viewings in Spanish property, with coronavirus sparking substantial international demand to own a place in the sun.
2020 saw Spanish property prices rise by 1.6%, having seen a decline in 2019. Following some surprisingly positive moments for Spanish property in 2020, foreign demand for 2021 also appears to be on the rise despite COVID-19 and post-Brexit concerns.
The Spanish Property Market and Brexit
In 2019, the Spanish property market experienced vigorous activity from expat buyers and sellers who were looking to resettle overseas or return home before the impending Brexit deadline.
A significant number of Britons were uncertain about their post-Brexit futures in Spain due to inadequate support and lack of communication from the British and Spanish authorities.
The biggest concern for UK buyers looking for a property in Spain was the news that UK travellers could only stay visa-free in the EU for 90 days within a 180-day period. With freedom of movement becoming a thing of the past, new regulations mean that from 2021 onwards, UK citizens are limited as to how much time they can spend in the holiday homes.
The British community in Spain is estimated to be anywhere between 500,000 to 1 million, but not all Britons are registered as Spanish residents. Out of fear, nationals began returning to the UK on the build-up to Brexit to avoid repercussions, which led to a decreased British demand for Spanish property.
In 2021, however, Brexit and COVID-19 do not appear to have dampened British appetite for Spanish property. Taylor Wimpey Espana reported a 39% increase in virtual viewings for Spanish property during the first week of 2021, with Alicante, Mallorca and Costa Blanca, being particular areas of interest.
Online property site, Kyero, have also reported a 446% increase in young Britons between ages 18–24 viewing Spanish property on their platform. It’s thought that with freedom of movement now gone, many young people are looking to combat this by becoming Spanish residents.
Spanish Property Market Optimism
The forecast for the Spanish property market in 2021 is difficult to predict due to the ongoing uncertainty of COVID-19. Whilst the rollout of coronavirus vaccines is promising, restrictions are still in place across Europe and the vaccines’ effectiveness remains a mystery.
Foreign buyers account for 16% of the Spanish property market. By nationality, Britons accounted for 14% of foreign market share in 2019, which was the largest group of foreign homebuyers, although the downward buying trend continues. Compared to the market share in 2018, the number of UK buyers was down 14.3%. During the first half of 2020, it was reported that purchases from British nationals were 41.1% lower than the first half of 2019.
The larger cities such as Barcelona and Alicante, where there were sharp price increases, showed considerable buying declines in January 2020. Although, according to the Institute of National Statistics (INE), by region, properties in the Canary Islands, Almeria and Murcia enjoyed strong sales growth in January 2020.
The Property Market, Coronavirus And Expat Buyers And Sellers In Spain
Spain was one of the European countries worst affected by the coronavirus. According to Worldometer, as of 26th January 2021, Spain has a total of 2,774,014 positive cases and a death toll of 57,291.
To curb the spreading of the virus, the Spanish government ordered a nationwide lockdown, whereby no-one could leave their homes except to go to the supermarket, pharmacy or to care for the vulnerable and elderly. Businesses and restaurants had to close, travel restrictions were in place, and police issued fines to anyone who did not have a sufficient reason for being outside.
The travel and tourism sector has been severely affected by the lockdown during 2020/21 and expats who rely on rental income, or are looking to sell and relocate elsewhere are also suffering.
Property rentals is a flourishing market in Spain, and many expats let their homes to travellers due to the high financial returns available. However, travel restrictions and border closures enforced worldwide have had a damaging effect on rental income, with tourists unable to travel.
Future Of The Spanish Property Market
While the coronavirus pandemic has delivered a shock to the Spanish housing market, it is a passing crisis.
The Bank of Spain expects the domestic housing market to remain fragile for some time but for international investment to retain momentum.
For the overseas buyer, life in Spain is attractive and an excellent investment due to its popularity with tourists. For Britons, if Sterling rallies in the coronavirus aftermath, the British demand for Spanish properties is expected to surge.
The concern during 2020 was that the coronavirus pandemic would dent property demand, with countries still in lockdown, and extreme social distancing measures in place. However, it seems that COVID-19 temporarily disrupted Spanish property market growth rather than derailing it.
Recovery may be slow, but there is still hope for the future of the Spanish property market.