Spanish Property Market 2021 [Update after COVID-19]: Property Prices in Spain and Investment Analysis

How Real Estate Market in Spain looks like in 2021? Current prices by squire meters in all regions of Spain — Chart. Trends and experts’ opinions on the Spanish Property Market. How Covid-19 Lockdown and Brexit can affect the Market. Read the latest 2021-report

1. Spanish Property Market in 2021

It sееms that last year helped to open up a new path in Spanish real estate market: high demand of rental properties, locals that no longer want to buy a property in a city centre, but are looking for a single-family terraced houses in the suburbs...

Nevertheless, many considered that the pandemic crisis would be a disaster for the real estate sector, so it is not a surprise that the debate on whether or not house prices are going to fall has returned to the streets. What the pandemic has done is injected an extra dose of uncertainty into the market that will continue to affect buyers, sellers and investors in 2021.

Concerning foreign buyers, following the positive impact of the Covid-19 measures and the recovery of European economies, experts estimate that as early as summer 2021 we will see a significant increase in foreign home sales, that dropped significantly the last year.

According to Idealista, at the beginning of 2021, the average cost of property in Spain is estimated at €1779 / m². This number is 0.9% higher than a year earlier. But how is it possible in times of pandemic and closed borders? Let's sort it out.

2. Property price changes compared to 2020

The above trends, combined with other factors, were the reason that local real estate managed not only to maintain its position in times of pandemic, but slightly increase in price. However, not all regions show a positive trend: 2 autonomous communities have maintained their 2020 prices, while 3 others have gone negative.
Changes in property prices in Spain in 2020
Changes in property prices in Spain, 2020
If you compare the dynamics with last year, it is clear that the resort regions in the east and south of the country slowed down in terms of price growth. Especially Andalusia, Catalonia, Canary Islands and the Balearic Islands. The highest growth this year was achieved in Extremadura (+4.5% of the price value against -1.3% in 2019). Experts attribute this to the desire of some Spaniards to change cities to the countryside.

3. Trends of Spanish property market

The shortage of new construction

In the spring of 2020, when it became clear that the coronavirus pandemic had entered our lives for a long time, some Spanish experts predicted a sharp drop in prices of the local real estate market. However, some subsequent events had the opposite effect: on June 9 in Spain, the decree "On Combating the Effects of the COVID-19 pandemic in the workplace" came into force. Now the use of sanitisers and other disinfectants is mandatory at all construction sites, and workers are forced to wear masks and gloves at all times, not to mention the social distance and other rules. As a result of measures, the cost of work has increased by almost 7%, and the speed of construction has decreased.
The number of construction licenses issued in the first half of 2021
The number of construction licenses issued in the first half of 2021. Screenshot from El Pais.
This summer the topic of the impending shortage of new buildings has become one of the main in the Spanish media. According to an investigation by the editorial board of El Pais, Spain is short one of three new buildings in 2020. Because of the Covid-19, some developers abandoned their plans or took a pause. Thus, about 70,000 homes in Spain were finished in 2020 compared to 106,000 in 2019.

Shortage of new buildings, together with an increase in the cost of construction has led to a price increase of Spanish new buildings – it has reached a maximum of the last 10 years: €2472 per square meter, according to the researchers of the Appraisal Society.

Growth in domestic demand and changes of preferences

This trend is attributed to the desire of people to stay away from major cities and crowds, and thus reduce the likelihood of virus spread. Besides, during the quarantine period, many Spaniards have chosen to live in less busy areas, as well as opted for rooms with terraces and more light (in March, when the pandemic began, about 8% of Spaniards lived in rooms with patio-view windows, that is, without a street view).
Spanish coast
With the start of the pandemic, Spaniards opted for detached houses in small towns
Thus, in 2020-2021, a local citizen is better off with his or her own small house than a large apartment. Now people, studying and working from home, consider separate rooms to be better than one large space. Also, outdoor areas such as terraces have a high value now.

According to the Fotocasa portal, since the beginning of the Covid-19 pandemic in Spain there has been a significant increase in demand for rustic farmhouses (+46%), villas (+36%) and adjoining houses for two families (+24%). In contrast, apartments dropped in demand (-14%). In the third quarter of 2020, 20.4% of all transactions were sales of detached homes, an all-time record.
Tenerife beach
The lowest coronavirus morbidity was reported in the Canary Islands
Now among the highest demand are properties in towns with a population of up to 5000 citizens. As well as in islands and coastal zones, there is a lower morbidity rate of coronavirus, according to WHO and the Ministry of Health of Spain. The lowest morbidity was noted in the Canary Islands (80 cases per 100,000 people in some cities). Doctors attribute this to the beneficial effects of fresh air.

As stated by analysts from Via Celere, the change in preferences has led to the fact that 54% of Spaniards are planning to change their place of residence in 2021. Also, some Spanish parents in 2020 bought homes for their children so they can study or work remotely. Thus, thanks to the increased domestic demand and rising prices for new construction, local real estate maintains its position even in tough times and the average price doesn't drop. According to the Spanish Institute of Statistics, in the third quarter of 2020, more transactions were made than in the second, indicating a gradual recovery of the market.

Remote and fast sales

With the beginning of the pandemic, the websites of Spanish real estate began to show ads marked as urgent. This is especially true in the secondary housing sector, which proved more sensitive to change. Unfortunately, Spain has become one of the leaders in the number of victims of Covid-19, especially among the elderly. Thus, the market was filled with a lot of inherited real estate.
Real estate in Spain for sale
One of the VirtoProperty properties in a remote sale
In 2020, many locals left their homes to be in a safer area or closer to sea or nature. Because of this, the percentage of urgent deals in the local housing sector has increased. "Remoteness" in 2020 has exploded not only in the workplace, but also in the sales industry. Many companies, including VirtoProperty, now offer a remote sales service. With us, you can complete transactions from your home without travelling. Learn more about remote sales.

As for secondary home prices, there was a 6% price decrease in the second quarter of 2020; by the end of the year, the figure had slightly declined. According to analysts at BBVA Bank, from April to September 2020, the number of secondary home transactions dropped on 26.1% nationwide, so the market "rolled back" to early 2019 figures.
Sales statistics of real estate in Spain in 2020
Sales statistics for new and secondary properties in Spain in the third quarter of 2020. The chart shows the number of transactions by region, as well as the distribution of the shares of the secondary/primary markets (blue/green). Screenshot from the study of Registrars of Spain.
Remote sales emerged by the end of spring which allowed foreigners to come back to the Spanish real estate market. Thus, in the third semester, foreigners accounted for 28.14% of all housing transactions in the Balearic Islands, followed by the Canary Islands and Valencia. According to the Registrars of Spain, most active foreign investors come from Italy, France, Belgium, Germany and Morocco.

Rental boom

In 2020, many homebuyers around the world were forced to cancel deals due to uncertainty during the pandemic. Spain was no exception, so locals and foreigners turned to renting en masse. According to Idealista, since the beginning of the pandemic, the number of rental listings across the country has increased by 63% (+80% when it comes to renting a room), since many people have postponed their purchases for a quieter time and opted for rent.
Property letting in Spain
As a result, the average profitability of letting Spanish real estate rose to 8.2% (of the cost of property per year). Before the pandemic, the figure was kept at 7.6%. The highest yield was recorded among offices (10.9%), followed by residential premises (9.3%) and parking (7.6%). By the end of the summer the cost of renting a house in Spain reached a historic high: an average of € 11,4/m² per month. Important factors that determine the price of apartments is a pool and an elevator.

Spanish hotels were renting rooms to locals as an alternative to office. The price for a "workplace" varies from 10 to 120 euros per day (usually from 8:00 to 20:00), you can also rent a conference room.

Residence permit as a way to get to Spain

Most borders between countries are still closed, while embassies don't issue tourist visas. The only option to get to Spain now from a non-EU country is to apply for a residence permit in the country, for which you must first obtain a national visa type D. Such a visa allows you to stay in Spain for the whole validity period.
La Muralla Roja Calpe
La Muralla Roja Calpe
Since the beginning of the pandemic, there was recorded the highest demand for a Spanish Visa D. Demand for immigration services will remain a trend throughout 2021.

There are various reasons for obtaining a type D visa. If we're talking about real estate, the fastest option with maximum benefits is the Investor Visa or Golden Visa. To get it, you should invest in a local property or securities at least €500,000, after which you and your relatives will be able to stay in Spain, get a job, travel freely in the Schengen zone, and much more.

Information demand for the Golden Visa also increased in 2020, for more than 70%. The same trend continues at the beginning of 2021, when the national visa remains one of the easiest ways to get to Spain. However, it is not necessary to spend half a million euros. You can get a residence permit in Spain through a long-term lease and a certificate of income.

There are a total of 9 legal ways to get a residence permit in Spain: real estate, work, study, family ties, as a refugee, and so on. If you have grounds to apply for a Spanish residence permit, we can assist you in this matter.

4. Current real estate prices in Spain

Provinces of the highest demand among foreigners

Now let's have a look at the provinces of Spain, most popular among foreigners, mainly the coastal resort areas and islands. Below you can see a list of all the provinces of Spain with a share of foreign purchases over 10%. First place was taken by Alicante, followed by Santa Cruz de Tenerife and Malaga.

Property prices in the capitals

Let's analyse infographics with prices in the capitals of autonomous communities at the moment. Once again: in 2020 there was a tendency among locals to move to smaller towns, that is why large cities have failed to grow in price or have become cheaper. This is especially true for the central part of Spain (Madrid, Toledo, Zaragoza among others).
property prices in Spain in 2021
Property prices in Spanish capitals at the beginning of 2021

Examples of prices on the coast in early 2021

As we have said, the vast majority of foreign home buyers in Spain, including Brits, are interested in purchasing real estate on the Mediterranean coast. Below we give examples of prices for various types of properties in locations that are popular among foreigners.

5. Spanish property price forecast for 2021

In 2021, due to the economic consequences of the Covid-19 pandemic, property prices will fall in almost all housing markets of Western European countries, as reported by analysts of S&P Global Ratings. As for Spain, the risk assessment agency predicts a decline in housing prices from 3% to 3.5% with expectations that the price increase will resume in the second half of 2022.

According to opinion given by the credit rating agency Fitch, the price of housing in Spain will fall by 4-6% over the next year, before stabilising in 2022. The agency has studied the situation of the real estate market in sixteen major economies around the world and has concluded that Spain will see the biggest fall in prices, along with the United Kingdom, due to the unemployment resulting from the pandemic.

Coronavirus, even if it ends in the coming months, will long affect the value of Spanish real estate, as noted by the experts of the Spanish major CaixaBank. According to the study and forecasts of experts, in 2021 the price of local property will fall by 6%-9%, and return to pre-crisis indicators is possible not earlier than in 2024. Specialists say the restoration of pre-crisis figures is not happening before 2023. At the same time, the study said that the current crisis will lead to fewer losses in the real estate sector compared to 2008.

A positive outlook was given by the S&P Global Ratings: the market will restore in the second half of 2022. For early 2021, experts are already making optimistic forecasts: if the spring begins with a mass vaccination and the disease will be taken under control, the market has every chance to recover by the end of 2021.
Thank you for your attention! For more information please contact the managers of our agency. It is our pleasure to assist you on a way to your dream!
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