Future of the new buildings’ market in Spain — growth, trends, forecast
Future of the new building market in Spain — bad or good times are coming?
According to the Ministry of Labor and Social Security of Spain, in October 2020, 1.25 million residents are employed in construction. This is only 2404 less than in October 2020, even though over six months we've been living in the global coronavirus pandemic circumstances. It's not that bad. And Paloma Vázquez, Secretary of the Spanish Labour Foundation of Construction Industry, reports that nine out of ten construction workers in the country have managed to keep their jobs.
Does this mean a bright future for the Spanish real estate sector? Will property prices fall due to the pandemic? When will the market recover? What are the rumours about the shortage of new properties in Spain? Let's dive into it.
1. Less construction licenses. Is Spain facing a shortage of new properties?
News on the deficit of new housing, threatening the country soon, began to appear more often in the Spanish press. One of the first alarms appeared in El Pais. According to the article, from January to July 2020 in Spain were issued around 46 513 permits for the construction of new buildings. This is 32.1% less than in the same period last year. In other words, due to the consequences of the pandemic, Spain is now losing every third new building. This is especially evident from the July statistics, which is traditionally one of the most active months of the year: only 6,143 building permits, which is 48.7% less than in 2019.
The number of construction licenses issued in Spain in 2019 and 2020. Screenshot from El Pais article.
"Simply put,– reports Daniel Cuervo from the Spanish Association of Construction Promoters (APCE). – This means that in 2019 began construction of 106 thousand houses, and in 2020 there will be around 70 thousand".
2. How does the property price change and what offers are to choose during a pandemic.
In spring, when it became clear that the pandemic was going to stay with us for a long time, most experts predicted a sharp fall in housing prices. However, the subsequent events had the opposite effect: the Royal Decree "On combating the effects of the COVID-19 epidemic in the workplace" came into force in Spain on June 9. Now all the workers on the construction sites must be equipped with antiseptics, masks and gloves, follow social distance and other rules. Developers have calculated that due to these rules, the cost of construction has increased by 7%, while the pace of work has decreased. This factor and the reduction of construction licenses led to the increase in price of Spanish new buildings – it reached its maximum for the last ten years: € 2472 per square meter. Idealista reports this regarding researchers from the Appraisal Society.
In the face of an uncertain future, Spanish families buy new properties for their children so that they can have a safe place and work remotely
Juan Fernández-Aceytuno, Director of the Appraisal Society of Spain, explains the trend as follows: "During the epidemic, people once again realized the primary importance of having a safe place. Investors suppose that in the face of an uncertain future, real estate remains a reliable sector for investment." The expert also adds that Spanish families in 2020 are more likely to spend savings to buy a home for their children so that they can feel more confident in the face of the pandemic, as many are now forced to work from home. Thus, the demand for new properties among locals remains consistently high, and the price continues to grow. Spanish real estate remains in demand not only among Spaniards, but also among foreigners, because Spanish properties offer a priceless gift: Mediterranean climate and lifestyle.
Another factor: with the beginning of quarantine open spaces, properties with terraces and private pools have dramatically increased in demand. Market experts are sure that these types of real estate will not get cheaper. In general, analysts note that now is the right time to buy a new home: shortly there may be a shortage of decent offers from developers (again, due to the reduction of construction licenses), and while customers still have the opportunity to buy housing at pre-quarantine price and get keys from their new housing in 2021.
What type of housing is trending now and why?
As for the secondary housing, it is possible, on the contrary, to benefit from the price drop. Decrease in price of resale properties after the first wave of Covid-19 is estimated at 6.1% and gradually continues. According to many specialists, in this situation, it is possible to make a deal at a lower price than the market average and catch luck by the tail. For example, take a closer look at the inherited apartments intended for urgent sale and other properties that require repairs (some owners and investors currently seek to get rid of assets that require additional investment).
What type of housing is trending now and why?
As for the secondary housing, it is possible, on the contrary, to benefit from the price drop. Decrease in price of resale properties after the first wave of Covid-19 is estimated at 6.1% and gradually continues. According to many specialists, in this situation, it is possible to make a deal at a lower price than the market average and catch luck by the tail. For example, take a closer look at the inherited apartments intended for urgent sale and other properties that require repairs (some owners and investors currently seek to get rid of assets that require additional investment).
3. When will the market recover? Forecasts from specialists.
At the moment, there is no consensus on this question. Most experts agree that now Spanish property becomes cheaper, and the consequences of the pandemic will be visible at least at the end of 2021. Analysts from CaixaBank predict a decline of 6% to 9% by the end of the year and return to pre-quarantine figures no earlier than 2024.
The large banks like UBS and Bankinter expect that the fall in prices in 2020 will not exceed 6%. And the most optimistic forecast was provided by S&P Global Ratings: -3.5% in 2020 and market recovery by the second half of 2022.
The editorial staff of VirtoProperty has asked several Spanish developers to give a forecast on the local housing market. Representatives of most companies, including Esphouses (Costa Blanca), Maryporto (Malaga) and others, agree on some key points:
The large banks like UBS and Bankinter expect that the fall in prices in 2020 will not exceed 6%. And the most optimistic forecast was provided by S&P Global Ratings: -3.5% in 2020 and market recovery by the second half of 2022.
The editorial staff of VirtoProperty has asked several Spanish developers to give a forecast on the local housing market. Representatives of most companies, including Esphouses (Costa Blanca), Maryporto (Malaga) and others, agree on some key points:
With the beginning of the pandemic sales have fallen, but in summer, the market started to recover. Now local developers are worried about the end of the year, because the borders are still closed, and the number of COVID-19 cases in the world is not decreasing.
If the vaccine doesn't arrive on the market in early spring, some construction companies will have to close down. If a vaccine is already available in the first quarter of next year, sales will return to normal. The following year the prices of medium-sized houses in the elite sector are expected to decrease the most.
Suppose we are talking about the Costa Brava. In that case, there will be an increase in demand (due to postponed transactions) for luxury real estate properties. We think that there should be an increase in activity the next spring. At the same time, middle-class real estate should also recover. Within a year, we plan to launch the construction of two new luxury residential complexes. We work mainly in the segment of elite real estate, and the demand among potential clients in unstable times always wakes up. We are noticing a growing interest in luxury housing. We are trying to at least virtually satisfy the demand from our clients.
А. Shashkov
Chairman of the Board of Directors of Group de Palol
Concerning new buildings during the pandemic: sales did not fall on the Costa del Sol. The British and Scandinavians, who traditionally are the most active buyers here, feel the same, and even more comfortable while sitting by the warm sea, keeping social distance. This option of self-isolation is popular. So now we experience a sense of even higher activity. Therefore, developers now give discounts very rarely. For example, only when in a complex of 70 apartments there are 1-2 units left, they can make 5-8% of a bargain.
Anna Baltsevich
VirtoProperty representative, Andalusia
We definitely expect some shortage of property offers. To be more precise, it is not a deficit. The demand is the same, but less new properties will be built this and the next year. Of course, we try to be as flexible as possible in these difficult times. For our clients, we arrange remote viewings. It's not just a video of an apartment or villa, it's our agent who can even drive with you in a car when video calling you to show you around and the infrastructure of the neighbourhood, so you can feel the atmosphere. Germans, Belgians, Dutch love it, I mean remote viewings, and are not afraid to choose options this way. Russian-speaking customers are not so open to technology yet, plus the borders are still closed. Concerning the discounts – they are still not here. Sales are not on hold, so we can't count on some serious deals so far. Buying a new property in Spain is an excellent decision during the pandemic, quite a reliable investment.
Sergey Sinyugin
CEO of VirtoProperty
The specialists of Virtoproprety agency give several recommendations to the owners and potential buyers of real estate:
Please do not buy or sell real estate in Spain until you have consulted with us!
New properties in Spain
Contact us
Read next:
Where to buy property in Spain? 5 best locations
Why is a new property better than a secondary? Discover 8 reasons
New Developments on the Costa del Sol – best offers
- Do not panic – in the conditions of uncertainty; it is fear and panic that are the main leverages for decision making. These decisions are based on emotions, and therefore a significant risk that you may be wrong. It makes sense to sell and "dump" real estate under such conditions only if it is an extreme measure. In any other situation, the transaction is a risk for a significant loss of money.
- Watch closely what's happening on the market – monitor the price offers and read reviews. Trust what you've seen with your own eyes only.
- Purchase if there is money and confidence in the future, for such buyers a period of panic and crisis is the best time. It is now possible to find offers at a low price, or offer your terms. Crisis periods are often used by experienced investors, because with a competent approach, you can enclose more than one profitable deals.
Please do not buy or sell real estate in Spain until you have consulted with us!
New properties in Spain
Contact us
Read next:
Where to buy property in Spain? 5 best locations
Why is a new property better than a secondary? Discover 8 reasons
New Developments on the Costa del Sol – best offers
Thanks for reading! If you are interested in Spanish real estate, please, open our catalogue and choose an appropriate property. Take care of yourself and subscribe to the Virtoproprety social media to see future articles!