The arrival of the health and economic crisis caused by covid-19 has brought changes in the real estate sector. One of them is foreign investment in the Spanish residential market, which has been altered while waiting to see how the crisis evolves.
The latest data offered by the Association of Property Registrars, establish that during the first quarter of 2020 foreigners made more than 14,850 home purchases, reflecting a slight decrease compared to the more than 16,000 purchases recorded in the same period last year. In percentage terms, during the first three months of 2019, foreigners accounted for 12.20% of total home purchases, a figure that in the same period of 2020 fell to 12%, a minimal change.
The Instituto de Valoraciones points out several factors that could influence the interest of foreigners in housing in Spain:
- More attractive housing prices with respect to some of the main European cities: according to the latest European comparison data published by Statista for the first half of 2019, the average price of housing in some of the main European cities such as London, Paris and Munich was 16,420, 9,869 and 7,999 euros per m2, respectively, compared to 4,215 and 3,820 in Barcelona and Madrid. This means that currently in Spain the outlay required to purchase a home is lower than in other European countries.
- Sun and coast destination, a permanent attraction: Spain is a destination of great interest to Europeans thanks to its good weather conditions and its wide range of homes in coastal and sunny destinations. Without a doubt, this ingredient has generated the interest of foreign publics such as the British or the French, who in the first quarter of 2020 occupied 1.52% and 1.01% respectively of the total number of homes bought and sold in Spain, according to data from the Association of Property, Movable and Mercantile Registrars of Spain. Thus, one could think that this market will continue to attract the interest of foreign buyers with good investment opportunities.
- Uncertainty about the duration of the current situation and the impact on the economy: the digital transformation of the sector has brought with it a new trend in the marketing of homes based on the implementation of virtual tours and the signing of smart contracts, facilitating housing transactions between agents and investors anywhere in the world. However, the fear of a new period of confinement makes it impossible to quantify the impact that all this will have on the economy and especially on the sector, which has led the main players to adopt a ‘wait and see’ position and the activity of the sector has come to a considerable standstill.
- The focus of investments is changing: a change in the trend of investors’ targets is expected. On the one hand, tourist rental housing could see its demand impacted by the recovery of other alternatives such as traditional rental in the medium to long term. However, this decision will depend on the investor’s profile and on the estimated duration of their operation. This change in investment objectives could affect to a greater extent those investors looking for a property as a business than those looking for a second home for holidays or retirement in Spain, who will continue to prioritize the location of these in coastal areas.