Spanish Property Market 2019

Contents

In 2019, the global economy was forecast to grow by approximately 3.7%, while the Spanish economy was expected to grow by 2.2-2.3%. The average price of completed housing remained 34.7% below the peak value of 2007.

Financial and Activity Indicators

  • Average home sale time (liquidity): 8 months.
  • Financial effort when purchasing: 17.1% of annual gross family income.
  • Average amount of new mortgages: €123,797.
  • Mortgage payment: €563 per month.
  • Sales / existing housing stock: 22.7 transactions per 1,000 homes.
  • Building permits / existing housing stock: 3.9 permits per 1,000 homes.

1. Spain’s Real Estate Market in 2019

Toy house against Spanish flag background

Foreign Investment

In 2018, foreigners purchased 65,500 homes and apartments in Spain, representing 12.6% of total transactions. British buyers led with 16.6% of foreign purchases. They were followed by Germans (7.7%), French (7.4%), Belgians (5.8%), Italians (5.1%) and Swedes (5%).

Belgian, Swedish and French investors increased their market share. The Dutch spent the most - averaging €212,000 per property, while British buyers averaged €139,000. Russians invested an average of €167,000, Swedes around €137,000, and Belgians averaged €180,000.

Regional Popularity

Alicante became the most attractive province for foreign buyers. In the fourth quarter of 2018, foreigners purchased 41.28% of all property sold there, explained by the better price-quality ratio and favorable climate. Property in the Valencian Community was 24% cheaper than the national average.

Secondary Housing Market

According to the Fotocasa real estate index, 2018 ended with an average annual price growth of 7.8% - the maximum figure since 2006 (when growth was 7.7%). Price dynamics remained uneven across territories: the Madrid Community, Catalonia and the islands led with growth from 10% in Catalonia to 19.5% in Madrid. Secondary housing prices remained 36.7% below historical highs and corresponded to 2013 levels.

2. Spanish Real Estate News

Construction Projects

Construction activity

In 2018, about 100,000 permits for new construction were issued - approximately 25% more than in 2016. However, these figures remained relatively low: 2018 permits represented only 13% of the quantity issued in 2004-2006.

Industry professionals gave various forecasts for construction development:

  • One sector leader noted that choice for buyers remains limited “in megacities like Madrid and Barcelona.”
  • The CEO of a major developer stated: “In 2019, the sector’s drive for reconstruction and revival of mature neighborhoods in Barcelona, Madrid and other major Spanish cities will extend to new suburban territories.”
  • Another industry executive emphasized: “One of the key tasks for 2019 is to achieve balance between demand and supply. Market demand shows that Spanish developers should build 120,000-140,000 new housing units per year.”
  • A real estate director warned: “Demand remains stable, but there are areas where land ready for development is insufficient (for example, Madrid).”

Land Plots

Land shortage remained a serious problem, especially in Madrid, Barcelona, Andalusia and the Basque Country. One executive noted: “This is a problem that is aggravated by the unwillingness of responsible authorities, whereas it should be solved through dialogue and agreement of parties.”

An evaluation expert explained: “The absence of a unified law is the main reason for land shortage. A separate law for each autonomous community with different situations.”

Mortgages

Almost half of property purchases in Spain (45.5%) were made with mortgage financing. In 2018, Spaniards arranged 266,300 mortgage loans with an average loan amount of €138,713. Madrid, Navarra and the Basque Country led in housing credit activity.

Commercial Premises and Investments

Barcelona positioned itself as a high-yield investment zone. Several major office complexes with areas up to 37,000 m² were expected to open, while 54% of existing commercial space was concentrated in two business districts: 22@ and Fira de Barcelona. International corporations such as Yahoo and Microsoft had offices in these neighborhoods.

Savills Aguirre Newman forecasted investments in Barcelona office real estate of more than one billion euros in 2019 - 150% more than the 635 million euros in 2018.

Luxury Housing

Madrid ranked third globally for luxury real estate investments according to the Barnes Cities Index - a significant rise from tenth place the previous year. The ranking considered financial factors as well as economic stability, transport accessibility, taxation levels and education quality.

Barcelona offered a significant volume of luxury real estate, including properties in historic districts along Paseo de Gracia. One exclusive property included 21 four-room apartments on five floors with rooftop terrace views priced at around €15,000 per square meter.

3. Real Estate Prices in Spain in 2019: Good Growth Rate

Spanish real estate price infographic for 2019

Price Growth Forecasts

End-of-2018 forecasts indicated price growth within 4-6%. Tinsa forecasted growth of approximately 5%.

A leading analyst stated: “There will be gradual stabilization in Madrid, Barcelona and other cities with significant recent growth, but prices will continue to rise in their urban agglomerations.”

Market Activity in 2019

In January 2019, the National Institute of Statistics recorded 9,259 new housing sales - the highest figure in five years and 11.2% more than in January 2018. Meanwhile, 80.6% of transactions were in the secondary market.

Total purchases in January 2019 amounted to 47,645 units - 40% more than in December 2018. The most notable growth was recorded in Extremadura, Galicia and Aragon.

First Quarter 2019 Analysis

Spanish real estate became 4.9% more expensive in the first quarter of 2019 compared to the first quarter of 2018, marking the tenth consecutive quarter of growth. By April 2019, the cost per square meter reached €1,349. Price growth slowed in Madrid and Barcelona, while leaders in increases were Burgos, Valladolid, Málaga, Zaragoza, Valencia, Tarragona and Palma de Mallorca. In 15 of 50 provinces, the average cost per square meter decreased; the largest drop was in Zamora, Lugo, Albacete and Soria.

Most Active Markets

Growing demand was concentrated in Barcelona, Costa del Sol, Valencia, the Balearic Islands and Madrid - where completed housing prices exceeded €2,000 per m², and rent reached €20 per m².

A residential real estate director noted: “The average cost is about €1,800 per m² in new construction and €1,600 in the secondary market.”

Difference in Sale and Rental Prices

Solvia

Solvia’s strategy director indicated that concession agreements from 2017-2018 would increase the number of properties available for purchase in the short term, while in the rental market, demand and supply shortage pushed prices up. According to him, “this rental cost growth has a clear ceiling.”

Anticipa

Anticipa Real Estate’s CEO warned that market regulation could reduce rental supply. Development remained uneven: some regions saw price declines, requiring a cautious approach to political measures.

Youth Housing Crisis

According to the National Institute of Statistics, more than 60% of Spaniards lived with their parents until age 30 - due to unemployment and expensive rent, not family preferences. Almost 29% of young people had no permanent employment at the beginning of 2019. Rapid growth in the short-term tourist rental market further limited rental availability for young Spaniards.

The growth in real estate sales in 2018 was partly explained by rising rental prices, which encouraged buyers of all ages to consider property acquisition as a more profitable long-term asset.

4. Spanish Real Estate Price Forecast for 2019-2020

Specialists forecasted continued sector growth in 2019, but at moderate rates. Most transactions in 2018 were in secondary housing.

Market Participant Forecasts

  • Residential real estate director of a national company: “Demand for real estate will strengthen this year, reaching 650,000 sold units.”
  • CEO of an appraisal company: “The secondary housing market continues to occupy a significant share, primarily among population segments considering their first purchase.”
  • Real estate business director: “The Spanish housing market will continue recovery this year, with the main trend being stabilization.”

Growth Forecasts

Solvia’s director concluded that the positive trend of 2018 would continue with 5% growth, while housing cost growth would slow to no more than 4% after a 6.1% increase in 2018. Overall market growth would be driven by transaction volume rather than prices.

Anticipa analysts forecasted sales of approximately 587,000 units in 2019 - 5.4% more than in 2018.

Is Spain’s Real Estate Market Approaching a “Bubble”?

Experts denied bubble formation. One analyst emphasized: “We need to follow logic and not talk about bubbles in the sector, because this is not the case.”

Solvia’s executive explained that bubble talk is usually associated with speculation combined with “unusual” price growth differing from real property value. He noted: “In 2012, prices were adapted to what buyers could spend, and it’s logical that with economic recovery and employment levels, recovery began.”

Anticipa’s CEO noted: “In megacities like Barcelona and Madrid, prices rose because current supply cannot meet high demand.” He pointed to the shortage of available land for development.

Áurea Homes’ CEO forecasted: “Spain has reached a maturity point, and we no longer expect sharp growth in consumer activity, but the number of new projects will increase slightly - to about 80,000 new housing units.”

Industry leaders emphasized client influence on development direction. Vía Célere’s president stated: “Developers’ goal is to offer ecological, modern and smart housing that fully meets client requirements.”

Overall assessment: real estate sector specialists emphasized that 2020 would be characterized by fundamental maturity of the economic sector.

5. Spain’s Real Estate Market After Brexit

Direction signs

Brexit initially caused disruptions in housing sales to British buyers - Spain’s main international client base - but the consequences proved minimal.

The effects mainly manifested at the end of 2016 after the referendum. Sales to Britons decreased by 3.6% in 2016 compared to 2015, but then resumed growth with increasing average prices. Property in Alicante purchased by British buyers averaged €139,000 in 2019 compared to €129,000 in 2015.

Despite Brexit-related uncertainty, legal complications, pound devaluation and questions about service accessibility, sales to Britons in the Valencian Community grew by 27% from the critical 2016 year.

Market Share Changes

The share of British buyers in the market proportionally declined. After the June 2016 referendum, local developers intensified diversification to reduce dependence on British buyers. Britons comprised 23.5% of foreign property purchases in the Valencian Community in 2015; by 2018 their share had dropped to 17.3% of foreign sales and 21.3% (€675 million) of total revenue.

6. Conclusion

  • Sales growth is forecast at 5% to 10% compared to 2018 - from 625,000 to 650,000 housing units.
  • Expected price growth is 5% to 7%. In major cities and coastal areas, growth will be more moderate, but increases will affect more medium-sized cities.
  • The number of mortgage loans will increase by 10-15%.
  • Between 100,000 and 125,000 homes will be built.
  • Average rental cost - €900 compared to €859 in 2018.
  • The short-term vacation rental market continues to grow. Coastal housing continues to monopolize the interest of small investors seeking profitability.
  • Possible government intervention to control rental prices will remain on the political agenda.
  • More than 8 million Spanish homes need renovation. Restoring aging housing stock will become one of the sector’s drivers.
  • Profitability will stabilize. Commercial property profitability for investors will remain significant but won’t grow as in previous years. For the first 9 months of 2018, it was 9.3%.
  • Growth of flagship stores. Major chains will continue developing brand experience in key locations in 2019.
  • Madrid and Barcelona will continue to dominate the market, but to a lesser extent. Retail in medium-sized cities will attract more investor interest.
  • Online brands are betting on physical stores. More purely online operators with physical presence will appear, following the US trend where 850 digital brands plan to open offline stores in the next five years.