Will the prices of apartments and villas in Spain fall, rise or remain the same?
The expectations are the following:
- In 2022 the prices of new-build properties will rise on all Costas: including Costa del Sol, Costa Blanca, Costa Calida and the islands by 6.5%
- For the well-priced existing homes I expect that there will be a small negotiating margin of 3 to 5% on the asking price
What is the impact of the coronacrisis on the price of houses in Spain?
To understand that, we have to go back to the situation before March 2020, namely to mid-2019.
During the summer of 2019 I wrote the last pages of the book ‘How to buy a house in Spain’ and I made a forecast – expensive word for ‘prediction’ – about what I thought the Spanish real estate market would do in the autumn of 2019 and into 2020*.
In several places, by the summer of 2019, the real estate market was quietly overheating again. After the financial crisis of 2008, the market crawled out of the trough in the period 2014-2015.
The new construction prices in 2014 were extremely competitive and the developers could not sustain them for long.
Customers had to be convinced to buy back from a plan because the photos of rusted construction cranes on abandoned construction sites were still etched in everyone’s memory. Of course, pricing a product at a competitive price helps a lot. And those super competitive real estate prices were an understatement. Or how about a 65 to 70 m² apartment for 99,000 euros within walking distance of the beach? The following years the rapid price rises followed one another. In 2016, 2017 and 2018, three years in a row, new-build properties rose by approximately 6% per year. Add to that: too many developers building the same type of property in the same place, at the same time, and prices came under pressure again. Especially on the Costa Blanca South (below Alicante), the region around Estepona and to a lesser extent the region of Murcia, there were bargains to be had from the summer of 2019. Suddenly a swimming pool, which normally costs 20,000 euros extra, was included in the price instead of having to pay for it. Or you could negotiate the price again, where that was not possible before. In December 2019, we were able to negotiate more than EUR 500,000 discounts for our customers in one month. I then predicted that those discounts on new construction would last until at least the summer of 2020, at most until the end of 2020.
Sometimes I get the comment: ”Do you have a crystal ball”. No, I don’t have a crystal ball, but I stand with my two feet in the Spanish real estate market every day. I get feedback from our people – a team of 17 women and men, offices on the different Costas – both in Belgium and Spain – and hear what the customers are saying and what the seller and developers are saying. I read a lot of reports from other real estate experts, banks, the largest real estate platforms in southern Europe. Yes, I am a number freak .
I also hear how difficult or easy the negotiations are for our customers. Project developers who would otherwise not be open to negotiations suddenly want to negotiate. From the monthly ‘availability lists’ (lists that project developers e-mail to real estate agents with an overview of the properties that have been sold and are still for sale), I saw from the second quarter of 2019 that sales went less quickly. It took longer for properties to be sold. There was a small overstock that had to be eliminated. Due to corona, this entire process took longer than anticipated.
Is there still a demand for villas and apartments in Spain?
Yes, there was an overstock, but today the situation is completely different. The overstock has now been virtually eliminated. The number of building applications for properties has decreased slightly due to corona.
So the stock has decreased and there are fewer new-build properties in the pipeline and at the same time the demand for new-build is rising. The Spaniards now also want to buy new buildings, with large windows and lots of outdoor space. So that is extra demand for new construction, on top of the demand from foreigners.
Conclusion, the demand dropped slightly in 2020 because we were unable or difficult to travel, but the demand for (holiday) homes has not gone away and is now picking up again.
On the one hand it is now a matter of catching up, but on the other hand there is also new demand.
A number of foreigners have earned a lot of money in the real estate market in their own country in recent years. Just think of Denmark and the Netherlands, real estate prices have risen by 15% in the last year alone
With a price increase of 5.2 to 7.5%, depending on whether you buy an apartment or a house, Belgium is a small beer and the general (new construction and existing real estate) increase in real estate prices in 2021, in Spain, of +/- 4.5%, very modest.
And unlike what you sometimes dare to read in the Belgian and Dutch press, the appetite for foreign real estate has not diminished. People see the travel restriction as transient. Holiday parks and properties on the coast in our own country is not what our customers are passionate about. Our customers, together with the Scandinavians, Germans and French, especially want sun! And it is not for sale in our own country until further notice, let alone in Belgium or the Netherlands. Customers also want more quality of life. Quality time, a different pace, enjoying the wonderful Spanish life together with family and friends. Make memories they can indulge in for the rest of the year. That’s what it’s about.
And finally, customers who are conscious of their budget have understood that for once in Spain they can get more bricks for their money. If they buy new construction, they also save a lot of money on VAT. In Spain you only pay 10% VAT instead of 21%. So 11% less. You can do very nice things with that.
The demand from the Spaniards themselves is also expected to remain strong.
The Spaniards buy mainly because the fear is good after a strict lockdown, and they do not want to be ‘locked up’ again in small spaces, with small windows, little light and no outdoor space.
Most Spaniards were not too keen on the white modern villas with floor-to-ceiling windows and lots of light, which the Belgians and Dutch are fond of. They mainly swim in the sea and a swimming pool is used to cool off just before lunch. Now they want those homes with seas of light and their own swimming pool. So they become the competition of the foreigners.
Many developers therefore sell, much more than before, to compatriots.
And what about the demand for existing homes you might ask?
There is also an increase. And a rising demand with a constant supply, leads to a rising price. For those existing buildings, there is a difference in demand and price between the buildings still to be renovated and the buildings that have already been renovated. The demand for recently renovated properties is strongest. Few potential buyers really want to carry out a thorough renovation. When they say, ‘It could use some work’, they usually mean replacing a kitchen or bathroom and painting some.
But much of the existing property on the coast is from the 1990s, so now more than 30 years old; you won’t get there with that lick of paint; usually at least all electricity, plumbing and joinery must be replaced. And the house must be completely plastered both inside and outside. And that beautiful old floor often has to suffer because it no longer fits the modern comfort requirements of underfloor heating. These older properties have the great advantage that they are usually in a privileged location, closer to the sea. So if a thorough renovation doesn’t scare you, there are still gems in between. You also have a better chance of being able to buy these types of properties because the owners have passed away and the younger generation wants a modern property. With people who are urgently in need of cash, you can negotiate a lot about the price. That is also one of the first things we try to find out when we visit a building for a customer. Why does the seller want to sell and how fast does it have to go?
In summary: existing older properties, not renovated, can be bought at a good price. But keep in mind a hefty renovation. Recently renovated properties are very popular, so the negotiating margin is minimal. If you want me to put a number on it, I’d say discounts between 3 and 5% are possible. For example, this month (January 2022) we sold a recently renovated property in Calpe for 475,000 euros. The asking price was 495,000 euros and let me say that the negotiations were played ‘hard’.
Prices in Spain, both for apartments and villas, on the Costa Blanca, Costa del Sol, Costa Calida, and the islands of Tenerife, Mallorca and Ibiza are rising and will therefore continue to rise for the time being.
Depending on the sources, an increase of approximately 6.5% is expected for the whole of Spain and for the entire supply – i.e. new construction and existing properties.
Developers, construction promoters speak of price increases of up to 10%.