HORDES of foreign buyers helped drive Spanish home sales and house prices up robustly in the first quarter of the year.
The Spanish housing market has started the year with strong growth and momentum carried over from last year, with sales up 22% to 174,000 according to data from the Spanish notaries’ association, and house prices up 11%, having ended last year up 38% and 5.3% respectively.
Looking back, the pandemic-induced slump in home sales didn’t last long, and it seems as if the coronavirus might even have fuelled a property boom as the plague made people rethink their lives, and move home to suit their new priorities.
Sales only really fell heavily in March and April of 2020, with the recovery starting as early as May 2020, and sales back in positive territory by July 2020. Since then sales have grown every month except two, and by double digits almost every month since January 2021. Put another way, home sales bounced back quickly from the lockdown, and have kept bouncing ever since.
Sales boom on coast and islands
Home sales were up nationwide in Q1, but were particularly strong on the Mediterranean coast and islands, where foreign investors tend to buy. In the first quarter sales were up 47% in the Balearics, and 45% in the Canaries compared to the same period last year, but also up 26% in Andalusia – home to the Costa del Sol – and 30% in the Valencian region – home to the Costa Blanca.
Comparisons with the year 2020 are meaningless because of the lockdown that years, but if you look back to 2019 to see how sales this year compare to a ‘normal’ year before the pandemic you see sales up between 20% and 30%, and as much as 34% in Murcia. So the market is not just booming in comparison to 2021, when results were still skewed by the pandemic, the market is booming by any measure in recent years.
House prices follow sales
The house price chart paints a similar picture to sales, just with a bit of a time lag. Prices slumped between June 2020 and April 2021, but have been rising resolutely ever since. Nationally, prices rose 11% in Q1, but by 27% in the Balearics, where the housing market is on fire. House price increases were also above average in Andalusia (+16%), the Valencian region (+13%), and the Canaries (+12%), all according to data from the notaries.
Mortgage lending is also rising strongly, with new residential loans up 14% in the first quarter to 88,331, and the average loan value up 4% to 151,129€. One of the key factors driving property sales is the recent increase in interest rates, with Euribor turning positive in April for the first time in six years, and rising strongly in May, encouraging many people to buy before borrowing costs rise any further.
Foreign demand for property in Spain is another factor helping drive the market upwards. Foreign buyers increased 44% in 2021, compared to an increase of 38% in local demand, according to the notaries. More recent figures from the land registrars’ association show sales involving a foreign buyer up 73% in the first quarter of 2021 to 21,638 – the highest quarterly figure since records began. The strong appetite of foreign investors for Spanish property in the first quarter of 2021 helps explain the current boom in sales.
The Spanish property industry is making hay whilst the sun shines but there are clouds looming on the horizon, with rising interest rates, high inflation, surging energy costs, an economic crisis brewing, and war and plague lurking in the background. The Spanish housing market will probably face a more challenging environment in the second half of the year, though it has managed to shrug off all the challenges it has faced in recent years.
Check out more from Mark Stücklin at Spanish Property Insight for the latest news and analysis to help you navigate the Spanish property market as you buy or sell real estate in Spain.