The latter part of 2014 saw some small but significant movement in the Spanish property market, which has been in the doldrums since the economic crisis hit the country in 2008. Six years on, property prices are on average 45% lower and most Spaniards are not in a position to kick start house sales. However, there are some encouraging signs.
Prices of commercial property and offices in the larger cities, especially Barcelona and Madrid are moving upwards, probably as a result of large foreign investment companies which see an opportunity to buy whilst prices are still low. In some cases they are buying whole blocks. These investors are mainly coming from the Middle East, China and until the rouble crashed, Russia.
The Bank of Spain says it believes that house prices have reached the bottom - which can only mean they will start to increase soon. In fact, prices have already been going up in some areas, although the general market remains depressed. The problem is that the cost of buying is still beyond most Spanish people, and as a result the rentals have become increasing popular. This has led to those in a position to buy property, mostly foreigners, to buy in order to let, and this includes large investment companies as well as individuals.
High Street banks in Spain are beginning to offer mortgages again, however this is only to people they consider solvent and only for 80% of the cost of the property at the most, meaning purchasers must find at least 20% themselves. For the most part, buyers prefer to pay cash or through company funds. It is generally assumed though that mortgages will made available to a larger public during 2015, as the Euribor, the rate on which mortgage interest is based, is at a historic low, in turn allowing banks to offer mortgages at extremely low interest rates. One point to consider though if you are thinking of taking advantage of low interest rates is that in Spain almost all mortgages are a variable rate, so the banks will raise interest when the Euribor climbs which it inevitably will at some point.
In December 2014, the demand for property by foreign buyers reached a new high at 23% more than a year before - with 30,708 properties sold to non-Spaniards. In contrast, the market for Spanish buyers fell by 1%. The largest group of foreign buyers were the British, followed by the French, Germans and Russians. Interestingly foreign residents in Spain have also boosted sales.
Another sign of an improving situation is that the number of building permits awarded has continued to increase during 2014, and that also means that the construction industry will slowly start to recover after having almost completely stalled. In fact according to Eurostat figures, Spain has led construction in the Eurozone for several months.
For British buyers the news is good in many ways. Prices are very low at the moment, though this is not likely to last for much longer, Sterling is at around a 6 year high against the Euro, and Spanish mortgage interest rates are extremely low. Andalucia is the most popular destination, then Valencia, Catalonia and Madrid.
It seems that now is an excellent time to buy your dream Spanish home, with plenty of property on offer - although in some of the more exclusive areas there may be less available than you imagine. Good deals are to be found in all price brackets but don’t expect sellers to accept very low offers – after all, they also know that the market is slowly improving.