As industry experts prepared their analysis of the 2019 Spanish property market (reporting over 550,000 property transactions and price increases of over 5% nationwide) the world experienced an unprecedented situation. Countries went into lockdown, economies came to a halt, and priorities changed.
Spain experienced one of the strictest lockdowns in Europe. Record tourist numbers went to zero and nationwide property transactions fell by over 31% in March.
However, the feeling of fear and uncertainty experienced in the first weeks, gave way to optimism as new cases and fatalities decreased and plans were made to re-open borders and economies.
As confidence returned, online property searches and interest from property buyers increased. Particularly properties with large outdoor spaces, space for home office, or access to co-working spaces. Properties near recreational real activities and small boutique-style developments are in the highest demand.
Online platforms and 360-virtual tours replaced physical property viewings. Flexible purchase terms enabled interested buyers to reserve their dream property subject to viewing.
The Outlook for 2020 and into 2021
Despite the challenges the Spanish real estate market is currently experiencing, the Costa del Sol still remains an attractive destination for residential tourists and property investors. The spectacular climate and intrinsically relaxed lifestyle will not change. Nor will the demand once current restrictions are lifted and people can travel without fear of infection.
Based on recent purchase trends our predictions for the remainder of 2020 and 2021 are:
- Interest in luxury properties will increase.
Stock market investors will tend to move to property investment as the safest asset, improving their lifestyle at the same time.
- Buyers and sellers will aim to close transactions quickly.
As international quarantines may be reinstated in the coming months, buyers want to move into their new homes quickly to enjoy the winter months in the sunshine.
- Low cost holiday homes purchases will be replaced by second residence purchases.
Travel restrictions will have a minimal effect for property owners who spend the winter months on the Costa del Sol. The demand for second residences is overtaking the demand for a pure holiday home.
- Low interest rates will boost sales.
Spanish Banks are in good financial health and offer attractive mortgage options. Some investors may choose a more diverse investment portfolio, rather than reallocating assets, and use mortgages to leverage their purchase.
- Limited supply of modern, high quality homes.
The Tinsa Coastal Property Report 2020 found, that more than 80% of the Spanish coastal areas had no, or very low, supply in newly built properties.
What about the Property Prices?
Although the pandemic has caused a drop in the number of property transactions, there are no indications for prices to fall in 2020. To the contrary, Tinsa, the main Spanish property valuation company predicts an increase of 3% in 2020. Property prices in Andalucía increased by 3.5% in August.
The current situation cannot be compared with the financial crisis in 2007. Private vendors are generally not desperate to sell and would rather wait than sell their property for a lower price. Whilst we may see a slight decrease in some resale properties with lower demand, the difference between the asking price and selling price is not expected to be higher than 10%, after having been as low as 5% in recent years.
As mentioned earlier in the article, there is an extremely limited supply of new build properties in Spain. Transactions on the Costa del Sol confirm these findings too. Many new developments have already been sold out off plan, particularly on the western Costa del Sol and new build projects not yet launched (or unlicensed projects) may be postponed.
With the continued demand for new modern properties, developers and agencies do not expect any downward price trend in this segment.
The Costa del Sol will always be a popular destination for residential tourists and second home buyers. Although 2020 is forecast to end with a much lower number of total property transactions, mainly due to travel restrictions, high-end property searches are increasing. A coastal property in a good location will always be a safe investment, not only financially, but also for the Mediterranean lifestyle that is the dream of many.