The Spanish Property Crash Is Over: Is Now the Right Time to Invest in Property in Spain?
- Spanish property prices were at an historic high but crashed heavily after the financial crisis since 2007
- Prices are now rising across the country and there is scope for more growth in the future
- There is an excellent selection of properties in great locations, with potential rental income thank to the strong tourism industry
Update: at the time of writing the coronavirus pandemic’s scale had yet to be understood. Covid-19’s affects are not part of this market analysis.
Spain has traditionally been regarded as one of the best countries for investing in property. The Spanish property market has had some turbulent times in recent years, though. Let’s see what 2020 holds in store for anyone who wants to invest in property here.
A Bit of Background
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The property market here was booming at the start of the century, with the trend for price increases having already started in the mid-1980s and showing no signs of slowing down. Huge new housing developments were being worked on all over the country and prices were rising to record levels.
Then the 2008 financial crisis brought it crashing down.
A long period of instability led to depressed prices and unfinished developments lying empty. In 2013, it was suggested that residential real estate values had fallen by around a third since 2007.
In the last few years, the market has started to recover. Prices are rising and there is now a greater feeling of optimism in the Spanish property market. It is expected that prices will continue to rise, as they are currently still below the historically high levels seen before the crisis.
With five consecutive years of rising prices, there is genuine hope of properties continuing to climb in value for the next few years. In 2019, the Spanish Central Bank released figures that suggest that the residential market should give a return of over 9%. This is based on a gross rental yield of 3.89% and capital gain of 5.29%.
Lots of Properties in Great Locations
One of the legacies of the financial crash is there are still many terrific properties empty and up for sale. Banks and other financial institutions repossessed thousands of homes. In fact, Spain had the highest foreclosure rate in Western Europe between 2008 and 2015, with over 600,000 mortgage foreclosures and 380,000 evictions carried out.
From thriving cities like Madrid and Barcelona to bustling seaside location in Majorca and Marbella, the real estate market here is huge and highly varied. This means that there is something for every taste, with many properties at bargain prices.
From studio flats by the beach to lavish celebrity-style homes on private estates, the property market here covers just about every type of house imaginable. Right now, there appears to be more properties than purchasers, which is great news for shrewd investors.
The Opportunity for Rental Income
Many investors choose to buy homes in Spain for their retirement years or for their annual holidays. However, this kind of purchase also gives you the chance to earn rental income.
Spain is one of the world’s leading travel destinations, with close to 83 million visitors heading there in 2018. This made it the second-most visited country in the world and the outlook for the tourism industry is of even greater growth.
With tourism numbers expected to carry on growing, there is scope to earn rental income on an on-going basis. Rental sites such as Airbnb now make it easy to let out properties directly to tourists.
A Convenient Place to Buy
For many property purchasers, this is a convenient place to buy. There are great transport links here from abroad, with budget airlines flying to most of the main cities and resorts.
It is also a country that has large ex-pat communities, with British and German citizens among the most numerous groups. Ex-pats from the UK make up 250,000 of the total population of 46 million, which is down from the 400,000 Brits registered here in 2012.
These large communities of foreign residents mean that the locals are used to dealing with property investors from abroad. Indeed, if you choose a region with a high concentration of Brits you can expect to deal with estate agents who are fluent in English and might even be UK natives.
Spain has always been an attractive country for sun-seekers and other visitors. However, the financial crisis hit it hard, meaning that it lost its appeal for property investors for a few years.
Now, it appears that the time is right to make a move here. The property market is looking bright and the range of available properties is highly tempting.