The allure of southern Spain and its infamous Mediterranean lifestyle has remained relatively unchanged over many centuries. With over 300 days of sunshine per year and bright blue skies that stretch through summer, autumn, winter and spring, the reasons so many people opt to exchange the icy winds of the North for the warm Mediterranean breeze in the South are numbered and varied; but following one of the worst economic crises the Spanish had the misfortune of experiencing when the property bubble burst in 2007, some very favourable market conditions are currently creating an opportune moment to invest in Spain.
1) Low Post-Recession Prices
Prices fell for seven consecutive years in Spain after the economic crash in 2007 and the real estate sector in particular suffered a severe readjustment during this period, with prices falling by between 30 and even 50% across the country.
Today, house prices are still between 35-45% below peak levels on average. Recent house-price indices published by the Spanish notaries illustrate the stabilisation of Spanish property prices, indicating that prices have finally bottomed out, meaning now is the time to take advantage of the (rapidly decreasing) stock of high quality properties in prime locations available at significantly reduced prices.
2) Prices Are Rising
Amidst continuous improvement in economic conditions and an increase in consumer confidence and foreign demand, with foreign buyers now accounting for 1 in 5 house sales in Spain, house prices have not only stabilised in most regions, particularly in Barcelona, Madrid and popular coastal areas such as the Costa del Sol, but are also registering healthy increases. In Andalucía the house price index is showing an annual change of 2.99%, with an increase of 19.36% in sales to international buyers. House prices in Spain are rising at the third fastest rate in Europe, significantly bolstering the confidence of investors and already encouraging higher levels of property transactions in prime areas across the country.
3) Rising Mortgage Approvals
The economic recovery goes hand-in-hand with credit availability and bank lending. As demand and sales surge, Spain’s banks are advancing more loans to homebuilders and dramatically cutting their borrowing costs. A recent report by Bloomberg indicates that financial institutions in Spain have regained their confidence following an ailing period of instability, strengthening the ability of local and international investors to pursue the wide variety of investment opportunities available within the region. The ease of obtaining mortgage financing is aiding transactions levels, boosting the construction industry and little by little restoring the Spanish property market to its former glory.
4) High Buy-to-Let Potential
According to a recent global report by the World Economic Forum (WEF), Spain has an excellent infrastructure, a wealth of natural and cultural resources, and the most competitive tourism industry in the world. The report found Spain to be the third-most visited country in the world, with around 60.6 million annual arrivals as well as a positive potential for further growth, thanks to a current influx of tourists from emerging markets such as China, Brazil and Mexico.
Tourism in popular holiday destinations such as the Costa del Sol significantly contributes to the profitability of buy-to-let properties. In 2015, tourism alone brought a total of 11.5 billion euros to the Costa del Sol, and while 2014 saw a record 10.2 million visitors, 2015 welcomed 10.6 million visitors to the famous coastline, an increase of 4.3 per cent.
While for many years tourists opted for package holidays provided by hotels and hostels in their desired destinations, low cost airlines, the availability of an abundance of flights to a variety of locations and the internet has revolutionised the holiday experience. With a huge amount of new accommodation possibilities readily available, holiday home hire has increasingly become an option. For the holiday-maker this means a far higher standard of accommodation and improved holiday experience for less financial outlay, and for the buy-to-let property investor, the shift is creating high rental potential for their investments, especially in areas of significantly high levels of tourist demand.