Real estate after COVID-19: how the epidemic has influenced the Spanish real estate market, and how it is going to be in 2020?

By the middle of April, there are more than 18 thousand coronavirus victims in Spain, and the quantity of infected is in the hundreds of thousands. The country's economy, including the local housing market, sustains losses. Spanish real estate is especially vulnerable in this situation because its future mostly depends on foreign investment. Still, the borders are closed, and potential buyers do not have an opportunity of visiting Spain to view a property.

In this article, we analyze the current situation, provide the expert opinions and prognosis of the future for Spanish real estate.

Spain was one of the first countries who quarantined globally. In essence, the activity of most institutions (including the state ones) has frozen, and the citizens are urged to stay at home. In case you are stopped outside and cannot prove the valid excuse of being outside your home, in Spain you're looking at a financial penalty of 600 euro. Therefore deals cannot be cut — offices are not working, and local legal firms and banks cannot authorize and finalize a deal.

The Spanish government has decided to maintain the real estate market during the crisis period. First, it is possible to freeze the mortgage at the time of the epidemic. However, this option is available only for Spaniards, who lost their job or can prove the significant decline of income in any other way. The largest Spanish developers (Aedas Homes, Metrovacesa, Via Celere and others) maintained such measures. They claimed that they were ready to let clients indefinitely delay the next payment. Moreover, the businessmen who lost more than 75% of their income in March can receive financial compensation. The profit loss must be proved.

Also despite all of this, the building of houses is in process in Spain starting with April 13th. The work is carried out in agreement with the police, and the working day is shortened till 3 p.m. Besides, there are the following trends noted by Virtoproprety experts by the mid of April in 2020:

• Switch to remote work mode

Speaking about the deals, they are almost impossible during the quarantine. The translation agencies, banks, notaries and most of all other companies have reported about "closing the doors" for the customers and switched to remote work mode. It has limited the ability of transactions considerably and shortened the list of available remote operations.

Spanish developers have started to offer online-viewings of real estate. It is the only available activity and opportunity of communication with a client for the moment. As a benefit, developers offer to reserve the desired property for a tiny amount of 500 euro. It is allowed to refuse the option in a month with no penalty. This is a scheme offered by one developer in the new zone of Alicante — Playa San Juan Pau 5, see the offer.

• Building companies don't rush into discounts.

There are over 1600 newly built properties all over Spain and more than 300 developers in the Virtoproprety base. It is available and open for all the portal visitors. They are large companies and local developers. Since Spain has quarantined, we daily monitor developers' options, update of prices and special conditions. Only a few building companies have offered substantial discounts and benefits — here is the list of offers. There can be both cash bonuses and options when the housing price includes the furniture or parking place.


Building companies are not planning to dump yet. There are several reasons:

— quite limited offer of newly built properties, related to the shortage of land in the coastal zone;

— the financial stability of developers — no reason to "collect cash" of clients to carry out the construction work;

— high speed of building complexes — from 12 to 16 months average. Right now the properties, which are currently under construction, will be completed by the end of 2020 — mid of 2021 year. Since everybody relies on market recovery in this period, there is no reason to panic;

Indeed, the situation may change when Europe finally comes out of the quarantine, and the economic effects become evident. We observe the situation and provide our clients with daily updates.

• Secondary market — ads with "will sell urgently" note

The situation in the secondary market looks a little different. It is precisely the place where you can expect any attractive offers. Since the end of March, you can see ads with "urgent sell" or "price reduction" notes on the well-known Spanish portals with offers from owners.

Secondary market is more sensitive to any changes. And we don't speak about panic, because selling real estate when dumping prices is not the best idea. We talk about "forced" sales when owners cannot afford the costs of a second or third apartment or a house by the sea. It is the most distressing issue of sales for those who use the passive income of renting a home to finance their mortgage and pay housing costs.

Anyway, there are no dramatic changes or sharp falls in prices for the moment.

Nobody knows when the epidemic will end, but it is already clear that even with a short period, COVID-19 has significantly influenced the global economy, including the real estate sector. In particular, most banks in Spain have suspended granting mortgages and postponed the review of requests to the autumn of 2020 year.

The analytics of consulting company CBRE notes that postponement of sale transactions for the indefinite period has struck across the owners of real estate in Spain, who were going to sell it in 2020. It is especially true for the citizens of Great Britain, who expected to say goodbye to their Spanish housing in the light of Brexit finally planned for December 31st in 2020. The coronavirus may get involved in politics. According to Simon Pelling, the director of Sell4LessSpain, the pandemic may cause the delay of the Brexit period. Experts also predict that in the long run, the demand for Spanish real estate among the UK residents will stay constant, especially in Costa-del-Sol, Costa Blanca and other regions which are popular among British. It is expected that when the quarantine in Spain ends, there will be more people wishing to sell, not to buy housing, and this supposes potential lowering the prices at any one time.

Moreover, because of a switch to remote work mode, the form of working and communication has also changed.

The expert supposes that after the quarantine ends, there will be more business meetings outside offices, and communications will turn to video- and online conferences. That will allow us to "use working time more effectively and spend more time with our families ". Similar influence of the epidemic emphasizes CBRE: "Promotion of remote work has become normal in corporate life".

At the height of the crisis, the business communication between banks and their clients have also changed. Most European banks have walked towards people and agreed to delay the payments. The European Central Bank (ECB) has announced its intention to hold interest rates on a lower level. Besides, most governments have activated further easing of fiscal policy. The combination of these factors should both maintain the economy, and help people to survive the epidemic.

At the same time analytics make a reservation "there's a silver lining", and the current crisis has helped the governments and central banks of several countries to "realize how we should behave in times of uncertainty". So, the coronavirus epidemic can be considered as a challenge for humanity and as a "training" in case of future global tests.

Juan-Galo Macia, CEO of Engel&Völkers in Spain, Portugal and Andorra, considers three possible post-crisis scenarios for coronavirus in Spain. If you believe the specialist, the number of real estate deals in Spain will fall to 9% at best. The pessimistic scenario supposes falling sales of more than 20% and substantial falling of prices. "In any of these scenarios we should mention that behaviour will differ between the first and the second six months of the 2020, when the last two quarters of the year will be much better than the first ones. Also, we predict that recovery will continue in 2021, because we expect the economy to grow more than 3,5%, so the real estate market will turn to the expansion phase again.

Despite the severe consequences of the pandemic, most specialists of Spanish real estate stay optimistic. Ramon Riera, mentioned before, sees no reason to panic and compares the crisis caused by the coronavirus with a global economic crisis of 2008 year:

THE GRAPH OF FALLING SALES В 2008-2009: Because of the global financial crisis in 2008-2009 sales of the real estate in Spain decreased (-46% in April 2009), but then returned to the former level and started to grow.

The specialists of Virtoproprety company provide several recommendations to owners and the real estate buyers.

• Do not panic — fear and panic can become primary motivators while deciding in circumstances of uncertainty. These decisions are emotional, and there is a risk they can be wrong. Sell and "drop" the real estate in such a case makes sense only as a necessity. In any other situation, this takes risk to result in a considerable loss of money.

• Observe the situation on the market — monitor the price offers, follow them, read the reviews. Trust only the things you've seen.

• Buy in case you have money and confidence in the future — buyers like these have their best time in the period of panic and crisis. Right now they can find offers of best price or offer their conditions. Qualified investors use this because the competent approach allows them to become an owner of highly liquid real estate.

Do not buy or sell the real estate in Spain without consulting us!

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