Spanish Property Market Report 2019 - Sun And Golf Properties
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Introduction Following the end of yet another year, is a After the 2012 debacle that left the price time of reflection to redefine personal and of property at rock bottom, the real estate business objectives, with a view to starting market gradually recovered at a slow the new year that is already underway. Those but steady pace. Thus, year on year and, of us dedicated to the real estate sector especially, since 2015, not only did the throughout Spain and, more specifically property market exhibit good health but, in on the Costa del Sol, following five years of addition, an incessant growth that few market moderate but sustained growth, we must experts and almost no economists predicted. make a mandatory stop (an urgent and necessary stop), to reposition ourselves for Starting from the closest reference, 2018 the near future. For this, our proposal is was a year in which sales rose 11% over simple. We want to give you a detailed report the previous year. More specifically, and on the situation of the real estate market in according to data contributed by the National Spain in 2019, with projections for 2020 that Statistics Institute (INE), the number of homes are already approaching. But, before that, to sold amounted to 557,919 (not including gain some perspective of the market and and officially protected homes ‘VPO’). This is when to be able to thoroughly analyse the data, we the figure matched exactly that of 2008, encourage you to review the recent history which shows an authentic post-crisis recovery (over the past five years) of the Spanish real with solid foundation (see Graphic 1). estate sector. PROPERTY SALES IN SPAIN SINCE 2017 800.000 NUMBER OF PROPERTIES SOLD 600.000 400.000 200.000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The evolution of the real Source: Ministerio de Fomento estate market in Spain Graphic 1 from 2017 to 2019 Page 2
But there is one more important fact in As you will notice, the recent evolution of the addition to this: the volumen of sales from real estate market in Spain explains, in some foreign buyers broke all-time records in 2017 way, the continuous progress that the sector and is currently 12% of the total volumen (see has undergone, and what we foresee awaits Graphic 2). This provides an excellent incentive the Spanish property market in the future, for the immediate future. which we aim to uncover in this report. Graphic 2 Page 3
Property Sales: Current sales levels in the Spanish real estate market The increase in home sales suffered a The real estate market on the coast continued significant “stop” this 2019, almost in the its growth with the sale of holiday-type middle of the year. The lack of government properties, the main attraction of foreign and the waiting for the new Mortgage Law investors. We will refer to this in the next two were the determining factors of certain sections of this report. notorious detention within the sector. Then, over the months, ceased to be observed. The new Mortgage Law calmed the waters and the elections did the same. Individuals and corporate investors finally launched into the purchase of property, culminating in this way, a mostly positive year. If this is added to the fact that the middle sectors agreed to financing after many years of waiting, the results end up being optimistic from any angle they are looked at. Another change that was noticed this year was that shift in investment in buy-to-let properties towards the purchase of homes for one’s own enjoyment. The increased competition of temporary Airbnb style rentals and the high rates of running property rentals in Spain, have discouraged the purchase for these purposes. On the other hand Spain continues to offer very interesting areas for a second home, for leisure and free time for people over 50, whose purchasing power and lifestyle allows living a part of the year in their home country and another in a much more relaxed and sunnier place. Page 4
Current state of the real estate market on the Costa del Sol With its key areas such as Marbella, a true is still far from pre-crisis levels, however sales paradise of residential tourism, the Costa del within Marbella’s Golden Triangle are higher Sol brings together high quality properties (of than they’ve ever been (view Graphic 3 in various categories), intended for sale and also comparison to Graphic 2 on page 2). for short and long term rentals. Tourism is definitely a decisive element in the If we refer to rental properties, the price current situation of the real estate market of these in Marbella, for example, has a on the Costa del Sol. Malaga airport, days high price that amounts to € 22 per square before the end of 2019, reported that it had meter and is considered one of the highest surpassed the 19 million travelers it registered nationwide. Marbella, without a doubt, in 2018. Citizens arrive from 131 different thus becomes an inexhaustible source of destinations which, attracted by the climate, residential properties for rent, an activity that culture and lifestyle, become potential buyers did not stop in 2019 and promises to continue of homes in areas such as Marbella, San Pedro its upward trend during 2020. de Alcantara, Torremolinos, Benalmadena and other popular destinations of the Costa This phenomenon has increased, del Sol. To this phenomenon is added the fact simultaneously, the sale of real estate in the that the large hotel chains are expanding their area. Because Marbella attracts tourists with facilities or disembarking on the Costa del high purchasing power who, in love with the Sol, with proposals of high quality and price city after staying in hotels or rented houses, accommodation, thus promoting the arrival of decide to invest in the town for a holiday or high-class tourists to areas such as downtown habitual residence surrounded by luxuries Malaga , Benalmadena, Marbella or Estepona. and well-being. As previously stated, in This forms a virtuous circle that will remain in 2018 the national average of property sales force in 2020. throughout Spain matched that of 2008, but PROPERTY SALES IN MABRELLA SINCE 2017 7500 NUMBER OF PROPERTIES SOLD 5000 2500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The evolution of property Source: Ministerio de Fomento sales in Marbella, Estepona & Benahavís Graphic 3 Page 5
Real estate market situation in Malaga If we talk about Malaga, it must be said that it is a flourishing province and that its capital city is surprising however you look at it. In addition to attracting new tourism every year, it captivates investors from all over the world. This explains why some regions of Spain are still recovering from the consequences of the crisis and others, like this one, are in their most promising time. Truly, as a province and as a capital city with very strong satellite areas, one could say that the real estate market of Malaga is at its best. Not by chance, its real estate market occupies, for years, the podium of being one of the main and most dynamic capitals in Spain. It is worth noting that the more populated areas, such as Marbella or Malaga capital, are touching their “ceiling” or growth limit due, in large part, to the lack of land suitable for new construction. These areas are giving way to others, until today in growth and in constant expansion like the Cala de Mijas, the New Golden Mile, Marbella East or Estepona West. On these sites, which are also enjoying very good press, not only is there more land available, but, fortunately, the City Councils are driving growth and granting work licenses in record time. Page 6
Property Prices: Effects of the market situation on property prices and supply The price of homes in 2018 rose for the fifth sale that do not receive a viewing in months consecutive year, by 6%, reaching figures and therefore can even stop being of interest similar to those of 2007. There remains in the eyes of the real estate agents in charge much to be done so that prices match those of their sale, as they know it’s impossible to before the last major crisis in the real estate sell at the price the owner is asking, despite market, although it may be they never will. their advice. This, although it sounds like a bad prognosis, is good news. Why? It needs to be that way to Too optimistic prices is certainly an issue that, stimulate a buoyant and prosperous market. in the course of 2020, experts in the real estate Property prices are somewhat over-inflated market like ourselves need to advocate and in Spain. This means that, the sales cycle of educate property owners to list properties a house or apartment is much longer than at realistic, not over-inflated prices, for the that of 10 or 15 years ago. The main reason benefit of not only everyone involved in each according to specialists is, precisely, the stage of the sales processes (from the seller to unrealistic or inflated price. It is estimated that the buyer, through a long list of intermediaries prices are 20% above their real value, which between), but also to help the Spanish property would explain the brake on sales in certain market as a whole. areas of Spain. In fact, supply has grown and prices continue to be on the rise, so a buyer confined to a certain budget searches and searches without finding a viable alternative or decides to wait for a miraculous price drop, which then doesn’t happen. It is therefore imperative that property owners, are advised by real estate agents, to be aware that a sky-high price would have a negative and counter-productive effect. Why? A property that delays its sale, is a house that loses value and attractiveness within a portfolio and begins deteriorating, as the months or years go by without being inhabited. We are talking about apartments for Page 7
Property Types: Which types of properties are in most demand? Following the real estate recovery since There, in the so-called Golden Triangle made 2015, demand has become somewhat more up of Marbella, Estepona and Benahavis, where sophisticated. Buyers have stopped focussing new proposals and developments spring up only on the sale price of properties and again like mushrooms. According to data provided put special emphasis on characteristics such as by the College of Architects of Malaga, in 2018 modern style, comfort, quality of finishes and Marbella registered 587 new housing projects technology applied to the construction. This (252 in 2017) and Estepona 1,107 (compared indicates that, evidently, the market has turned to 800 the previous year). This shows an its course and has changed notably throughout upward trend that is believed to remain in Spain, especially, in Madrid, Barcelona, the 2020, although with some caveats. Buyers who Costa del Sol and Valencia. In these areas as descend from an airplane at Malaga airport, well as throughout Spain, a marked interest in with the illusion of defining a second residence superior quality and sophistication when buying in the province in a matter of days and, even a property was revealed. This, which had been in less than 24 hours, are faced with an offer manifesting in recent years, remained in force in of new construction so huge that It intimidates 2019 and will continue this year. Furthermore, them. the resale of second-hand properties, recovered during 2019, mainly, thanks to the fact that the Spanish banks re-opened the tap on mortgage loans. Which, without a doubt, made it possible for many homebuyers and investors to gain access to the Spanish property market, which was before mainly accessible to cash-only buyers. Likewise, many buyers of new promotions have returned to the resales market, which offers a better price per square meter and that, in recent years, there has been an increased trend in property renovations to add value, factors that have “motorised” the sale of properties more than 20 years old and more. Nevertheless, new construction continues to grow. On the Costa del Sol, for example, where there is still a lot of land suitable for construction. Page 8
What solution is seen in the face of this Another factor that is positively affecting the phenomenon? In the near future, the real launch of new construction properties to the sales possibilities will depend on how well market, is the granting of building licenses, informed real estate agents are to offer their which in most circumstances, are much customers a varied and, at the same time, shorter than before. In Marbella, for example, limited range of possibilities. Among hundreds delays used to be so long that they put the of new developments and off-plan properties real estate project at risk and, in addition, within the market, the ones that stand our also caused the real estate product itself to are those that show high quality, unbeatable lose interest in the eyes of buyers. We are location, design and, of course, an good price. mainly referring to off-plan projects that were With all these ingredients on offer, the dish born from a great idea or declaration of good will lean towards the proposal that meets intentions and ended up being diluted as an expectations and is in line with the potential unfulfilled promise. Fortunately, this no longer buyer’s budget. In summary: the future of new happens in Marbella, where building licenses developments in Spain, and more specifically are being granted more quickly than usual. in Andalusia, will be in the hands of personal And that is not all: in 2020, thanks to some real estate shoppers and renowned agencies measures taken during the course of this in the area. The success of the sale will depend year around the issue of urban planning, the on your “good eye”. Less is more in these times for the delivery of contruction permits cases. The non-Andalusian buyer needs a will continue to be reduced for the benefit of limited number of alternatives, very different architects, real estate agents and buyers. from each other, to make a purchase decision. No more than five or you will end up so overwhelmed that, in the face of perplexity, you may decide to postpone your desire to purchase in the region. Page 9
Property Buyers: The average buyer’s profile in Spain The profile of the average Spanish property Malaga? This capital, with its development buyer is that of a citizen between 25 and 45 which has increased the true value and price years of age with an indefinite employment of properties, registered 28% of foreign buyers contract. They are the ones who buy a house last year. to reside in and needs to obtain a mortgage. If we talk specifically about the foreign buyer, So, what can we summise? That the British in 2018, as we have already indicated, 12% market is very important throughout Spain of homebuyers in Spain were foreigners. The and, more specifically, on the Costa del Sol. citizens of the United Kingdom (13%) lead the But attention, as a result of Brexit, the level podium, followed by French and Germans of purchase from citizens of the United (7%), Moroccans and Romanians (6%), and Kingdom has fallen slowly but considerably. Belgians and Italians (5%) (see full statistics in In particular, potential homebuyers with an Graphic 4). approximate budget of € 800,000. We will have to continue waiting for possible Brexit shocks Specifically in Andalusia, foreign buyers in in 2020 and how the “uncertainty effect” 2018 accounted for 13% of the total, of which impacts the future plans of potential buyers of English accounted for 22%, followed by the houses and flats in Spain. Swiss (10%) and Belgians (8%). And what about Graphic 4 Page 10
What’s Next? Trends and predictions for 2020 Based on the detailed analysis of the data and the release of a large number of resale provided on the real estate market withing properties on the market, the supply could Spain in 2019, it is possible to predict outcomes outstrip demand, resulting in a lower price for the near future. In 2020, the sustained and much more serious competition. In such and sober growth of the sector is expected to circumstances, it would be expected that low continue. It is excellent news, although those and medium category homes will suffer the who are dedicated to the real estate market in consequences and those considered luxury, our country would like a new boom or explosion, with high quality and price in prime areas will something unlikely given the circumstances. It remain unscathed for some time. It is worth is estimated that at the economic and political mentioning, on the other hand, in spite of the level nothing will change significantly in the next progress of the real estate market in Spain 2019 two years, so the growth trend will continue and, above all, the size of its territory, it presents without haste or pause, reducing the chances a wide variety of situations, so it is necessary to of another real estate bubble burst. Until highlight that there are areas that may register today, the supply of homes in Spain satisfies deceleration symptoms, while others, such as their demand, but, be careful, an excess of Andalusia, will continue its upward trend and supply could reverse this situation, generating curve. a “rebound effect”. Due to the proliferation of new construction throughout the territory At a national and general level, the signs of stabilisation and good health of the real estate market provided by the current level of activity will predominate in the next year. Consequently, we can only be positive and optimistic about the future that awaits us in 2020. But, attention: the real estate sector must be cautious and not “rest on its laurels”. Spanish real estate agents should not take a step back in their pursuit of excellence within their daily work of advising new investors, since a false movement can take them to other latitudes. If you continue with your foot on the accelerator and a hand on the brake lever to react in real time to the changes that are coming, then success will be guaranteed, not only next year but also in several more. Page 11
CONTACT US PHONE: + 34 951 56 05 11 WEB: sunandgolfproperties.com EMAIL: info@sunandgolfproperties.com ADDRESS: Rosemary 3 Nuevo Rosario, Floor 1(C. C. El Rosario), 29604, Marbella, Malaga
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