Spanish Property Market to Improve in 2021
When the coronavirus pandemic first impacted Spain in March 2020, the Spanish housing market unsurprisingly came to a standstill. Real estate agents forecast steep declines in Spanish property prices as a result of COVID-19 with a lack of viewings and rapidly rising infections.
Although the Spanish property market experienced deterioration during the first half of 2020, interest picked up during the summer months as restrictions eased and the prospect of a holiday home became an attractive option for international buyers once again.
With foreign buyers making up a substantial proportion of Spanish property sales, Spain will continue to be an ideal destination for those looking to have their place in the sun or retire abroad. Whilst travel restrictions have prevented overseas buyers from viewing properties in Spain, coronavirus vaccines are creating a brighter future for those looking to secure a holiday home. As a result, it’s forecast that 2021 will be a much stronger year for Spanish property.
The overall outlook for Spain’s economy is also improving, having taken a turn for the worse last year. In May 2020, the Bank of Spain announced that they predicted a 12.4% fall in gross domestic product (GDP) and a rising unemployment rate of 20%. As a result, agents anticipated a sharp yet inevitable price drop within the Spanish property market.
There were conflicting opinions with regard to how much Spanish property prices would be affected. Colliers International Spain anticipated that there will be a short term 5-10% drop in property prices during 2020, though Spanish savings bank foundation FUNCAS stated that they believed the drop will be more in the region of 10-20%.
Following the rise in property demand during the second half of 2020, Spanish property prices went on to experience a 1.2% price increase – a much more positive outcome than many anticipated.
Take a look as we outline the different areas of Spain expected to experience the greatest demand as the future of the Spanish property market.
Where will Spanish property experience the biggest boom?
During the first half of 2020, estate agents had predicted steep declines in property prices across some of Spain’s biggest tourist destinations including Palma, Mallorca, Alicante, Barcelona, Valencia and the Canary Islands.
Whilst these Spanish tourist destinations were particularly hard-hit last year due to travel restrictions brought about by COVID-19 but they are also the areas where unemployment is highest, with overall growth tending to stagnate.
However, according to estate agents Engel and Volkers, Spanish tourist destinations could be on track to experience high demand from property buyers once again in 2021. The firm has stated that there was a 64% increase in Spanish property search in the first two months of 2021 compared to the same time last year.
This trend is a clear indication that the coronavirus crisis does not appear to have dampened appetite for Spanish homes. Engel and Volkers highlight that Mallorca is set to be particularly popular amongst international buyers this year due to its strong Mediterranean lifestyle and culture.
Florian Hofer, managing director of Engel & Völkers Balearic Islands states “Mallorca ticks all the boxes for our clients who are looking to invest in the island where the premium end of the real estate market has remained stable despite the rollercoaster year we experienced in 2020.”
Outlook for the Spanish property market in 2021
As it stands, it is currently uncertain as to what levels of growth will be experienced in the Spanish property market for 2021. However, real estate agents are of the opinion that with the Spanish economy improving, all signs point in a positive direction. Whilst the demand from foreign buyers is clearly still strong, surging coronavirus cases across Europe are weighing on the overall economic outlook for the European Union (EU).
That being said, economists have predicted for a 4.4% increase in Spain’s GDP for 2021 and believe the economy will likely return to pre-pandemic levels in 2022. With UK holidays abroad on track to resume in May, it’s hoped that tourism will provide a much needed boost, seeing an improvement in unemployment and pushing up property prices.
Those buying Spanish property from the UK will also be subject to new post-Brexit rules, requiring a visa if they wish to stay in their holiday home for more than 90 days within a 180-day period. Whilst demand is strong, many are yet to become accustomed to the new rules, meaning the increased internet property searches may not necessarily result in real life sales.
Only time will tell if the Spanish property market reflects what many agents have predicted and just how long these changes will last.