How does the conflict in Russia/Ukraine affect the real estate market in Spain?
The world is turned upside down. What we absolutely did not expect has happened. It is difficult to estimate what the consequences will be.
A lot of misery. Should I talk about investing in Spain about this?
I wondered before writing this.
Should I pretend nothing happened and avoid the topic?
I don’t have glasses bol but I have nevertheless made an attempt, from my experience, to list a number of things.
If you want to invest in real estate, you want to be sure that the prices are stable in the country where you are going to buy and would you like to see prices rise in the future.
I think the question is therefore justified: ‘Will the current conflict throw a spanner in the works?’
The first thing we should ask ourselves is: What is the current situation in Spain and what is driving the demand for real estate in Spain? And will much change?
- Low interest
- Cheap money
- Limited range of properties that meet the requirements for 2nd residents
- A lot of savings in lockdowns by Spaniards and foreigners
- Revision type of houses: Spaniards now also want new construction
- Work more flexible
- More wealth: 5 million new millionaires worldwide in 2021
- Rising inflation
With today’s knowledge, little will change in my opinion.
Yes, interest rates may rise over time. However, it is expected that this will go very slowly. Finally, many European governments also borrowed a lot during the corona crisis and they are therefore not really waiting for rising interest rates.
The next question we have to ask ourselves is: What is the share of Russians and Ukrainians compared to the total number of transactions in Spain?
In a good year, about 550,000 properties are traded in Spain, of which about 10% are foreigners.
And what percentage of this are sales to Russians and Ukrainians?
In 2021, 2% of purchases by foreigners were purchases by Russians or 1,280 properties.
This number has been declining since its peak in 2014.< /p>
In 2006 1.24 % Russians and Ukrainians 1.12%
In 2008 4% or 1270 buildings of which 64% new construction
In 2009 6.5% Russians
In 2010 7 % Russians and 1% Ukrainians
In 2012 9.62% Russians or 3399 properties
Russians mainly buy in the Alicante region and on the Costa de Sol.
They mainly buy second homes .
They mainly buy in the higher segment. In the Netherlands and Belgium one speaks of the higher segment for homes of more than 1 million euros. In Spain, people only speak of the higher from 2 million euros, which is a considerable difference.
And today there is a shortage of decent supply in the higher segment in Spain.
So the expectation is that what is not bought by Russians will quickly find another buyer.
Other-point of attention is, what’s the stock-market going to do?
If it recovers quickly enough and so not too much value is destroyed, anyone who wants to buy a second residence can actually buy it. If the stock markets fall too much, a number of people may still postpone the purchase of a second home or make a smaller purchase.
What if Europe gets into a general recession?
Then there may be fewer homes for sale, also in Spain. However, unlike in the financial crisis, there is now no overstock of new-build homes, but rather a shortage. Even more during the corona crisis, fewer building applications were submitted than before corona, so the shortage has become even greater. From the summer of 2019, there was a slight oversupply here and there on certain costas. This surplus has been completely eliminated since the autumn of 2021, and the supply of existing homes in well-situated locations is also more balanced than in 2008.
In addition, the price/quality ratio is much more balanced than in 2008. Today, in 2022, you will still pay less per square meter than in 2008. So it is expected that the supply of correctly priced homes will still be sold and so there will be no pressure on prices.
Moreover, in Spain, raw material prices are also rising. After all, steel, wood and cement are world prices.
In summary, the general expectation is that the prices of new construction will increase by between 6 and 10%.
What about the rental prices ?
Possibly have an effect on short-term rents and hotel rental.
Why? Because of competition expected from Turkey.
Whether Spain has a good tourist season always depends on what happens in other southern countries. When there is political unrest in Turkey, Tunisia and Egypt, more customers book a holiday to Spain. If it is quiet in those countries, they are strong competitors.
It is currently fairly quiet there, but the evolution of the corona virus also plays a role. Tourists therefore prefer Spain. Spain is therefore counting on extra tourists this summer!
But we also have to take into account the tourists that Turkey attracts. Turkey receives 4.5 million Russian tourists every year. It is now expected that few Russians will go on holiday to Turkey given the situation. Turkey is already anticipating the storm and has already started extra campaigns to persuade the British and Germans in particular to go on holiday to Turkey, to the detriment of Spain.
The number of British and Germans who rent or go to a hotel in Spain is therefore possibly much less than Spain had hoped.
Again, we don’t have a crystal ball.
We are monitoring the situation closely for you.
If there is a change in the real estate market, you will read it in the next blog.
To the question ‘Is this the time to invest in Spain‘, my answer remains: Do you love Spain, is it your dream, do you have the money and does it fit into your life today? , then this is the most suitable time for you to buy! Because one thing is certain, prices are also going up in Spain.
