Spanish property market news digest for December 2021

A personal 13th century castle at 70% off, Valencia the most attractive autonomy, new builds vs second homes. What was happening in the property market in December and a forecast for 2022.

1. Your own castle with a 70% discount

Castle Castillo de la Vela in Maqueda
Castle Castillo de la Vela in Maqueda can be purchased for only €3.2 million
Castillo de la Vela castle located in the Spanish municipality of Maqueda (the province of Toledo) can be purchased at a discount of 70% off the original price for only 3.2 million euros.

The fortress of Maqueda was originally a Roman observation post, which in times of Muslim rule, was turned into a castle. In 981 the fortress was expanded and improved, and in the 15th century the reconstruction began, which gave the castle its current appearance. Even today, echoes from various eras can still be seen behind the walls of the castle, including the visible legacy from the times of the Arab conquerors. You can even enjoy the preserved archaeological excavations from Roman times. The castle is renowned for being home to Queen Isabella I of Castile, also known as Isabel I la Católica.

The Castillo de la Vela was declared a Historic and Artistic Monument on June 3rd, 1931. Now it is protected by several Historic Heritage laws.

Future owners are always interested in the layout. So… the castle is shaped like a regular rectangle and has two levels. Its walls are 3.5 metres thick, protected by moats and round towers. The main gate faces north and bears the coat of arms of the Cárdenas-Enríquez family who rebuilt the castle in the 15th century. They transformed it into an impregnable fortress with the best fortifications of the time. Beyond the front gates you can see a second, sturdier wrought-iron gate with grooves for the defensive structures that block the path of the invading enemy.
Why is there no way the castle will be sold? It is not only because of its high price and remote location. There are quite serious encumbrances with the castle.

According to experts, the castle could be used as a conference centre, as it had large halls or as a historical hotel, but this requires not only changes to the current restrictions, but also substantial funds for the refurbishment of the building, which would fall on the shoulders of the new owner. Generally speaking, it takes a long time to sell such properties, and the burden is serious. Meanwhile, such deals are quite real. Most recently, in Gatic (Basque Country), someone purchased a castle for 4 million euros. The buyer promised to fully preserve the historical appearance of the monumental building.
Olga Lomko,
co-founder of VirtoProperty
The castle belongs to the Spanish Ministry of the Interior and was the barracks of the Civil Guard. The building was renovated to house the future Museum of the Civil Guard, which was never inaugurated. The reconstruction cost the state a whopping 5 million euros. To recover costs, it was decided to sell the castle.

In 2013, the state put the castle up for sale for 9,588,290 euros. There was no interest in it. In 2015, when the real estate sector seemed to have recovered, a second attempt was made to auction it, this time with a 30% reduction in price, but the auction did not take place. Since then, none of the attempts to sell Makeda Castle have yet succeeded.

The state has continued to reduce the price of Maqueda Castle and the current price at which it is being auctioned has been reduced to €3,254,195.80, almost -70% of the original price.

In order to participate in the auction, interested parties must pay €191,423.28 as a deposit and the deadline for bids expires on 12 January 2022. The opening of bids will take place on 26 January.

2. Boom in new buildings construction in Spain

List of the top property developers in Spain in 2021
These are the developers who will lead the Spanish construction market in 2021
Several years of recovery from the recession, then a covid quarantine – in recent years, the life of Spanish property developers have been quite difficult. Despite all the obstacles, after several years of slow growth, 2021 was the year of a boom in new buildings.

And to a large extent this explosive growth was influenced by the pandemic: postponed quarantine and the suspension of business activity, significant changes in the requirements of the property buyers, coupled with an increase in activity of the builders were the drivers of development.

According to Spain's Ministry of Transport, Mobility and Urban Development (Ministerio de Transportes, Movilidad y Agenda Urbana (Mitma), 85,945 deeds of completion were signed during 2020, a 9% increase compared to 2019 and the highest figure in eight years. According to Brainsre, 127,000 new homes will be commissioned in 2021.

Around 130,000 new homes are scheduled to be delivered in 2022, based on licences sought by developers.

And here's a list of companies that lead the way in Spain in terms of the number of houses put into operation in 2021:
  1. Neinor Homes
  2. Aedas Homes
  3. Metrovacesa
  4. Vía Célere
  5. Amenabar
  6. Habitat
  7. Pryconsa
  8. ASG Homes
  9. AQ Acentor
  10. Premier

Virto Property collaborates with many of the companies on this list, regularly updating their catalogue of new build properties.

View full catalogue of new buildings in Spain
Although the number of houses planned for delivery in 2022 seems to be identical to 2021, we already see how the market of new buildings is turning from a buyers market into a sellers market.
What does this mean for the buyer? It means that buyers will be competing for highly liquid, well-priced properties, and the first to make a decision and put down a deposit will have the advantage.
So if you are planning to buy a new property, you should be prepared to act quickly.
Sergey Sinugin, co-founder and
CEO of Virto Property

3. Valencian real estate skyrockets

Valencia, City of Arts and Sciences
Valencia becomes the most attractive place to buy real estate in 2021
Valencia real estate booms – the growth of sales in the region is 3 times higher than the average in Spain.

Real estate activity is growing rapidly in the Valencian Community. According to statistics from the notaries as for October, sales of all types of real estate in the region increased by 31% compared to the same month in 2020. That is 11% more than the national average (19.7%).

Of the 8953 transactions recorded in October 2020, the number of transactions rose to 11729 in 2021.

As the quarantine of October 2020 has had a significant impact on real estate market activity, the comparison is not entirely correct. And if we compare the data in October 2019 (the year before the pandemic), the growth is not so impressive in numbers, plus 15.8%, but it is three times more than the increase in the number of transactions on average in Spain in that period (the national increase was 5.9%).

The leaders of the growth are three municipalities: Alicante, Valencia and Castellón. In these cities the increase in activity amounted to almost 17%.

Real estate in Alicante
Real estate in Valencia
View all the real estate in the Valencian Community
The rapid growth in demand for real estate in the Valencian Autonomous Community in general and in Alicante and Valencia in particular, is not only due to geographical and climatic factors, but also to the availability of adequate market offers. A good liquid option can still be purchased for €120,000 or more.
Yulia Kaptsiuh, Sales Manager
Alicante office VirtoProperty

4. High bills lead to increased interest in alternative energy

Building in Barcelona with solar panels
Aceredo, the Spanish village that has returned from underwater after 30 years
Growing electricity prices have led to a surge of interest in energy-saving technology.

Electricity prices have started to rise across Spain since the summer 2021. Much of this has been due to rising gas prices because of the political crisis - Algeria has suspended gas supplies to Spain via Morocco through the Maghreb-Europe pipeline due to conflict with Morocco. But not only that – high taxes on emissions and changes in the billing principles also came into play.

And with the onset of cold weather in a country where heating is mostly possible with electricity, the bills skyrocketed. This is not an exaggeration – instead of the usual 50-80 euro bills, some have paid 200-300 euros.

In November, the average daily price on the market was €193.43/MWh, which is 361.2% higher than the average price in November 2020. And by 16 December, another record electricity price of €302.48/MWh was set.

According to the forecasts of the management company Schroders the high prices which have been recorded on the European electricity markets for a few weeks now will continue at least until June 2022.

Attempts by the government to influence the situation have not brought significant reductions despite the 11-step programmes adopted. Both the introduction of flexible hourly tariffs and the possibility for consumers to switch between providers and some price controls have not led to significant reductions.

So in the current situation, both Spaniards and the government are looking for alternatives, including renewables.
Developers have begun to emphasise in their proposals the availability of solar panels and alternative sources of electricity for the needs of the house.

New building in Barcelona with solar panels
Villa in Alicante Zero House (Smart house fully self-sufficient in electricity)

The municipalities are also introducing programmes to support alternative sources of energy. Among them, income tax deductions (IRPF) are available for residents in six autonomous communities:

  • Cantabria
  • Navarra
  • Community of Valencia
  • Balearic Islands
  • Canary Islands
  • Murcia

More than 600 municipalities in Spain will be able to take advantage of property tax incentives (IBI) .

Subsidies for those installing solar panels and aerothermal systems will also be granted up to 50% of their cost, depending on the scope of the renovation and the location. The maximum preferences are promised to those living in rural areas.

Check out the Smart Home, which allows you 100% autonomy in terms of electricity.

5. How prices are changing in the secondary housing market

The price of housing continues to rise, but unlike the surge in the new housing market, the secondary market shows a stable moderate growth.

The average price per square meter on the secondary market in Spain for the year grew by 1.8%, positive dynamics recorded in 13 of the 17 Autonomous Communities.
Year-on-year price dynamics on the secondary real estate market in Spain by region
Year-on-year price dynamics on the secondary real estate market in Spain by region
The average price of secondary housing in Spain in November was fixed at 1911 euros per square meter.

Regions where there has been an increase in the secondary real estate prices are Madrid and the Basque Country with prices 3,140 euro / m2 and 2,884 euro / m2, respectively.

They are followed by the Balearic Islands with 2 861 euro / m2, Catalonia - 2556 euro / m2, the Canary Islands at a price of 1783 euro / m2, Cantabria - 1779 euro / m2, Andalusia - 1713 euro / m2, Galicia with 1632 euro / m2, Navarra with 1623 euro / m2; Aragon at 1608 euro/m2; Asturias at 1558 euro/m2; La Rioja at 1475 euro/m2; the Valencian Community at 1452 euro/m2; Castile and León at 1447 euro/m2; Mercia Region at 1150 euro/m2; Extremadura at 1146 euro/m2; and Castile-La Mancha at 1114 euro/m2.

6. A new skyscraper district to appear in Benidorm

High-rise development project in Benidorm
High-rise development project in Benidorm
In the last days of 2021, the Plenum of the City Council of Benidorm will approve the partial urbanisation plan of the Levante.

The plan, entitled Ensanche Levante, submitted by land owners and developers, involves the construction of highrise buildings, supporting the architectural strategy previously defined for skyscrapers, which respects the balance of interests of developers and ecological requirements.

According to the plan the minimum height of the buildings will be 20 floors.

The area will contain residential buildings, hotels and public spaces. Part of the flats in the constructed residences will be allocated for social housing, which will be administered by the municipality.

A total of 560,000 square metres is to be built, which will change the appearance of the part of the Levante neighbourhood and will, according to the architects, cover the basic need for new construction in the area over the next 5-10 years.

The project is due to be finalised and approved by spring 2022.

Apartments in the Benidorm towers – new development

6. Forecast for 2022

We will talk in detail about how the real estate market in Spain will develop in 2022.

  • Price growth continues
According to all estimates, the market will continue to grow steadily, the expected level of growth is 4%. But this does not mean that all regions and properties will be in equal conditions.

Among the regions that will grow faster than others, experts name Madrid, Malaga, Valencia, Alicante, Seville, Murcia and Barcelona.

The instability between price and demand is the reason for the faster price increase in new buildings. This is due to both the increase in costs for developers during the pandemic and the increase in demand in the market, as well as the rise in prices of building materials and logistics around the world. At the beginning of the year, the trend of faster price growth for new buildings is expected to continue.

The average price per square metre of housing in the country will increase to about 2016 euros/m2 over the year.

  • Real estate as an investment
The gap in sales between new construction and secondary real estate was a record high – 34% according to data for the first 9 months of 2021 alone. This is the highest difference in the last six years; previously, the difference between the new-build and secondary markets was a couple of percent, with a maximum difference of 20% for a short period.

This gap was caused both by the post-pandemic recovery of the market and by the desire to invest in new builds as an instrument to keep savings. Judit Montoriol-Garriga lead economist in de CaixaBank states: "favourable financing conditions will continue to support investment in real estate".
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