COVID 19 & The Spanish Property Market19th May 2020
What should have been a happy welcome to the spring time in Spain and a welcome to see you down here again soon has turned into an uncertain future to which we all have to try keep being optimistic.
Many foreign - and local - home owners in Spain are asking themselves what the corona virus crisis will mean to the housing market.
As I have previously mentioned in our newsletters any impact on the housing market in Spain has t one looked at different angels. The two main ones are the residential market and the holiday home market. Also this time there is a big difference to what is happening and what will happen in the two areas. Difficult to cover all aspects but below some words on some of the main factors that will determinate the price of your home - selling or buying.
For now everything has almost come to a full stop. Only operations that were already planned are moving forward. The amount of foreign inquiries have dropped significantly but for a while it seams that the local demand is still there.
2nd and 3rd quarter are expected to be very slow. Experts speak about a price decline of 6-9 % in the residential market and more in the holiday home market. We think that the even a 9% decline is optimistic for the year. As regards the holiday home market the decline in prices are more likely to be between 10 and 15% and in number of sales we expect it to be between 25% and 40% for 2020. The logistics for a foreigner to buy in Spain for now look impossible to overcome. 4th quarter might rebound a bit but most purchases from foreign buyers depends on the property market in their home country and this is simply too uncertain to predict about although optimistic investor see a market getting back to normal by the end of the year.
Prices will go down. But we are not looking at the same type of crisis as the financial crisis so the impact is expect to last less time. The financial market and the housing market is a lot healthier than 12 year ago. But as long as the airlines do not have a clear future how to get back to operate somewhat normally the foreign market is doomed to be hit hard. This market is typically in the coastal areas. These areas typically also living off the tourist industry and many businesses will be going out of business if they are not already.
In the residential market the middle class buyers will be reduced to a minimum. Slowly starting to invest in homa allowed by banks credits this market will in for a major slowdown again. This being the most important market for economy to grow this is again a set back for the Spanish economy. Unemployment has risen again to above 20% just within the past 2 months and it could become worse when the governmental financial aids cease.
We will need the European central bank to push for more lending and the banks to assume larger risks to compensate somewhat for this situation not only for the housing market but as for the economy in general as well.
For the foreign buyers, and there are buyers in the market although they are not able to come down, it will mean lower prices. Not at the same discounts as the last crisis and not for the same amount of time. For the next 6 to 12 months there will be some bargains to find but not at all at the same level as during the financial crisis. Low interest rates and many people with cash will limit the impact and length of the crisis in the real estate market.
During the last crisis we did experience a clean cup in the market and the sellers who really need to sell now will still get a decent price, we will not see a complete collapse like last time. There is still much cash in general in the market and many sellers will simply take their property off the market if they do not need to sell. All in all it mean less volume.
As always the marginal markets will be hit the hardest and well located properties the least. Those who will loose on the short term as always are those in a hurry to sell, investors or private owners. So nothing new on this - stay calm.
For the real estate industry the crisis will also have a significant impact - tempting to say, thank you for this. Experts are mentioning that of the 55.000 registered in Spain 25.000 will go out of business and only the prepared will be left.
With these words we look forward to hearing from you and especially to seeing you down here as soon as the situation allows.