Where Will Recovery Take the Spanish Property Market?

The Spanish property market is continuing with its recovery from the depths it reached in the wake of the global economic downturn. There are a number of strong indicators to show that the Spanish market is not only in recovery but is making good progress at clawing back what was lost.

Prices are on the up, and construction is once again picking up; two of the best indicators of a healthy sector. Demand is also returning to Spain’s property sector, with indications suggesting that Spain’s crop of potential buyers is becoming more interested in acquiring property. The fact that prices, though recovering, still remain low and affordable mortgage rates are on offer is leading many to decide that this is the time to buy.

In Spain’s wider economy, employment figures are decidedly on the up. This is important news, as high levels of unemployment – particularly amongst the younger generation – was one of the factors that defined Spain’s difficult time during the years of and after the economic downturn. This was also, of course, a key factor holding back many would-be buyers of their first properties.

Another positive sign of recovery in the Spanish market is the fact that longstanding issues of oversupply are finally being dealt with. The advent of the financial crisis and the way in which Spanish property was particularly hard-hit put an abrupt end to heavy development activity, coupled with a sudden and pronounced drop in demand. Many banks also found themselves in possession of properties they didn’t really want, as a result of people hit by the financial crisis being left unable to keep up with mortgage repayments. This combination of factors meant that the Spanish market simply had too many properties and not enough buyers, which did not bode well for plummeting values. Now the market is in recovery, however, buyers are returning, investors both domestic and foreign are picking up the low-cost excess stock, and while development has begun again, it is proceeding at a modest rate that is not keeping the market in oversupply unnecessarily.

As the recovery continues, there are a number of specific results that are expected to be seen in Spain’s property market. Naturally, recovery will involve increases in property values, and this is already being seen in key regions especially. Prices of Spanish properties for sale across the nation were up 1.8% in June, and are expected to grow by roughly another 5% by the end of the year.

One key fruit of Spain’s recovery is expected to be a return of interest from foreign buyers – and like price growth this is already decidedly underway in the most popular locations. Interest from foreign buyers, whether investors or second home owners, was one of the things that characterised the Spanish market before the crash and is likely to become prominent again after recovery.

Fresh construction activity is also something that analysts expect to see as one of the defining features of Spain’s recovery. Lack of demand, financial difficulties as a result of the downturn and the existence of too much stock already standing have all severely constrained developers in the past few years, so the return of activity to the construction sector will be an important step in resuming normal service.

Mark Burns

Mark Burns is a Director and Property Investment Consultant at Hopwood House. With over 10 years' experience in property investment, Mark has provided investors with a wide range of opportunities in exotic locations around the world.

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