Real estate in Spain – what’s happening after the lockdown

Quarantine measures in Spain have relaxed since May 6th, though the situation is still far from normal for buyers and sellers across the country.

In April most Spanish analysts predicted that house prices would decline by 10-15% in 2020.

There has been a drop-off in prices, as the cost of housing fell by 2.8% across the country in the third quarter compared to the same period the year before, the Gesvalt housing report shows.

While this isn’t a big drop, it indicates that in some areas buyers may be able to grab a bargain, while at the other end of the spectrum sellers may profit from being cautious and selling up once the market has recovered.

However prices are still rising in some regions, so it depends where people are looking to buy or sell.

For example, Costa Blanca property for sale prices increased by 2.3% year-on-year and 1.3% month-on-month in September.

House prices

The next few months are said to be crucial for the market.

According to Bankinter customers will postpone the decision to buy for 6-12 months, which could result in there being more supply than demand, potentially dragging down prices.

S&P Global Ratings predicted a 3.5% price fall, followed by a recovery from the second half of 2022.

However Bankinter and UBS are more pessimistic, estimating that house prices will drop by around 6% in 2020.

Gonzalo Bernardos, professor of economic theory at the University of Barcelona, gives an even starker view.

“Most developers and agents do not intend to reduce the price right now. They are waiting and monitoring the situation,” he explains.

“But then there will be a spectacular fall. Almost three months of economic stagnation will lead to a decline in housing prices in Spain by 13%, in Barcelona and Madrid – by 7.5-9%. In general, I do not believe that prices will return to their previous level before 2023.”

Whether house prices should return to peak levels seems up for debate amongst Spanish experts, as some reckon housing was overvalued in the country in recent years.

Indeed, the cost of buying and renting has outstripped incomes in the past few years. During 2013-2020 the price of rental housing increased in Spain by almost 50%, while the average salary rose by just 1.5%.

Buying at a discount

In this environment some buyers are haggling with sellers on price, in an attempt to buy below the market rate while they can.

Oscar Larrea, chief executive of Engel & Völkers Madrid, says: “The price of housing has historically been linked to GDP and unemployment rates.

“According to the most conservative estimates, in 2020, Spain’s GDP due to the epidemic will lose about 15%. Similarly, the price of housing will change.

“At the same time, the IMF forecasts economic recovery by the second quarter of 2021. Much depends on the policy of the European Central Bank.”

It’s debatable, but 2020 and 2021 could be considered an excellent time to buy, before the economic recovery takes hold.

Focusing on the sellers, some are waiting out this period before listing their properties, which is a sensible move, according to Jesús Duque, vice president of Alfa Inmobiliaria.

“I’d postpone my deal for now. The world is still pending, and it’s not easy to find an investor right now,” he says.

“Yeah, there’s already been many deals that were made since we got back up and running. But it’s mostly transactions where the buyer has already made a deposit, and all he or she had to do was sign the papers.

“At the same time, the total drop in sales is obvious.”

Properties on the market

Attractive offers for housing have not disappeared, says the CEO of Uxban, Gonzalo Robles, as those who are interested in early sale remain particularly active.

Sadly due to the pandemic, you’ve also a got a number of people who’ve inherited property from the death of older relatives. Rather than leaving empty properties gathering dust it’s likely that a lot of them will be on sale as soon as possible to potential buyers.

You could also see property come to market from those who buy holiday apartments in tourist areas, make repairs and earn on resale. While many of these people will have lost out financially on the project due to the pandemic, some will want to cut their losses rather than waiting for a recovery before they sell.

One category of housing that’s in short supply is new builds, because the construction time has been affected by the pandemic, only resuming in mid-April. With this in mind, it’s unlikely that new builds will be available with a big discount.

“Some buildings remain unfinished due to the epidemic, in other cases, the deadline and cost of work have increased, in such conditions the developer will not reduce the price in order not to lose money,” says the director of residential and land property of CBRE.

Average property prices after Covid-19

The price of Spanish property peaked in June 2020, despite the pandemic.

According to Idealista with reference to the Society of Appraisers, the cost of new real estate in Spain at the end of June was €2,472 per 1 m², which is the highest price since 2010.

This may be surprising, but Juan Fernández-Aceituno, CEO of the Society of Appraisers in Spain explains why this was the case.

“Investors have again recognized the residential property as a haven for their investments in the face of an uncertain future,” he says.

He went on to say that a number of transactions in 2020 were completed with cash, rather than a mortgage. In Spain it’s not unusual for parents to buy homes for their children.

As of June 2020 the average property cost per square meter in Spain was €1.730 € per m2, 1% more than in June 2019. The price per square meter of housing for rent was €11.4, a 4% rise from June 2019.