Strong interest from overseas buyers helping the Spanish property market

Spain’s prime residential property market is still being driven by international buyers, attracted by the country’s low prices, investment opportunities and lifestyle, according to a new report.

There are the strongest signs yet that the market is about to reach the bottom, with one set of official figures showing prices decreasing just over 1% overall in 2013 compared to 2012.

Also, Spain’s official House Price Index published by the National Institute of Statistics, based on data from the Notaries, fell by 7.8% in 2013, down for the sixth year in a row but the annualised declines of 2013 were an improvement on the year before, when house prices fell 12.8%.

According to Mark Stucklin of Spanish Property Insight, the data seems to suggest that the crash in property values is starting to peter out after six grinding years of falls.

The data also shows that new build house prices fell 8% and resales by 7.7%. On a quarterly basis, house prices fell 1.3% in the last quarter.

But at the higher end of the market sales have improved vastly and once this starts moving down into other sectors Spain could start to see a property market recovery.

According to the latest report by Lucas Fox international buyers are driving residential sales. It points out that the so called golden visa scheme which grants automatic residency to non-European Union citizens who invest €500,000 or more in Spanish property has attracted a growing number of residency investors, mainly from the Far East, the Middle East and Russia.

Lucas Fox posted its highest number of annual sales ever in Barcelona and it says this is an indication of a growing demand for quality, prime residential properties in the city. The majority of prime residential property buyers came from Northern Europe, in particular the UK, France and Switzerland, with strong interest from Russia, China and the Middle East, and small numbers of national buyers coming back into the market.

Buyers from the UK, France, Russia and former Soviet countries accounted for the majority of high end sales on the Costa Brava where prices continue to be heavily discounted across the market, with average prices having fallen by as much as 30% to 40% since the peak of the market in 2007.

Marbella and Ibiza have also seen growing interest from foreign buyers. The report says that the Ibiza property market was one of the strongest in Spain during 2013, with a healthy transaction pace compared with the rest of Spain. Lucas Fox completed one of its biggest sales to date in December of last year selling a package of apartments worth €18million to a Middle Eastern investor.

While the majority of buyers are from Northern Europe and the UK, 2013 saw increasing numbers of buyers from the Middle East and the US, as well as continued strong interest from European buyers. The greatest growth markets for enquiries and property viewings came from the Far East market.

In Mallorca international buyers are most interested in villas, rural estates, vineyards and equestrian properties in close vicinity to the island’s best golf courses, marinas and yacht clubs. Palma de Mallorca is giving the strongest signs yet of stabilising prices, ending 2013 at an average of €1,870 per square meter.

‘While prices show signs of stabilising across all our regions, there is still some margin between sellers’ asking prices and buyers’ valuations of a correct purchase price, with sales closing at an average of 15% below asking price but in some cases up to 25%,’ said Lucas Fox co-founder Alexander Vaughan.

‘However, the increase in sales transactions reflects heightened buyer confidence in the Spanish real estate market and a general feeling amongst international investors that the market has bottomed out or is close to doing so,’ he added.

But not everyone is convinced that prices will bottom out this year. Barely a quarter of executives working in the property industry believe Spanish house prices will reach the bottom n 2014, according to a survey by real estate consultants CBRE.

In the same survey in 2013, some 90% of those surveyed expected prices to fall in 2013 and they were right, suggesting that sentiments have improved in the last 12 months.

However, gloomy economic fundamentals like high unemployment, restricted credit, and weak growth explain why 75% of executives in the Spanish property sector see no reason to expect house prices to bottom out in 2014.

Amongst those who expect house prices to continue falling the majority expect declines of less than 10%, an improvement of sorts. A quarter also expect housing starts of 175,000 this year, a big improvement on the 33,870 planning approvals in Spain in 2013.

But on the positive side resale asking prices were stable in February, according to data from Idealista, one of Spain’s largest real estate portals. They remained more or less unchanged on a monthly basis, at around €1,726 per square meter.

On an annualised basis, however, asking prices fell 5.3% but again the annualised falls appear to be getting smaller, down from 6.6% in January.

Asking prices in the Idealista index increased the most in the Canaries with growth of 1.5% and fell the most in Aragon, down 1.9%.