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That's the title of an article I just read in the Spanish daily, ABC. Basically, it's a review of a Bank of Spain report called, "Foreign Investment in the Spanish Residential Market Between 2007 and 2019." Apparently, foreign buyers of homes and property in Spain rose from 4.2% in 2007 to 10.% in 2019.
The report highlights that during this period there have also been changes in the habits of these investors, one of them being the decrease in buyers from the UK. It notes that Brexit and the devaluation of the pound contributed to the fact that between 2017 and 2019 the British sold more houses than they bought in Spain. During this period the percentage of foreign purchases by Britons fell by 6 points, and last year represented 8% of transactions by residents of Spain's fellow EU countries. The opposite happened with countries such as Romania and Italy, which increased their participation in the market to 12% and 8% respectively. At the same time, the total of such purchases made by foreigners from countries outside the European Union are also significant (27% in 2019). Among non-EU countries, Morocco and China stand out, with respective
percentages of 14% and 6% of purchases by foreigners in 2019.
According to the report, there were other significant changes in property sales to foreigners. Between 2007 and 2010, they barely represented 3.3% of the market, but then grew strongly until reaching the historical maximum of 10.5% in 2014. That year the recovery of the sector began, which caused non-Spaniards to gradually reduce their involvement in the market. In 2019 they represented an average of 7.8% of operations.
The analysis also reportedly shows that the housing stock held by resident foreigners increased steadily from 2007 on, and then accelerated after 2014. Thus, in 2019, net purchases by foreigners accounted for almost 0.2% of the housing stock, almost three times more than in 2013.
The report also highlights the interest that these buyers have in Spain's coastal regions, especially the Balearic and Canary Islands. Nineteen percent of housing purchases in Santa Cruz de Tenerife were made by foreigners last year, followed by the Balearic Islands (16%), Alicante (15%) and Las Palmas de Gran Canaria (14%).
Regarding prices, the report indicates that between 2014 and 2019 the prices foreigners paid was 4% higher than those of domestic buyers, although this percentage rises to 10% when considering purchases in cities such as Tenerife and Palma de Mallorca.
ABC quoted the report as saying, “These differences are probably a reflection of the different investment profile in different provinces. In those on the Mediterranean coast and on the islands, foreign investors with high incomes, who demand higher quality homes located in better areas, surely have a higher significance."
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In recent years, there has been speculation that the presence of foreigners in certain areas of Spain has caused housing prices in those regions to be more expensive. This theory the Bank of Spain now corroborates, at least in part.
From the report: "The high correlation between population growth and rising property prices suggests that the increase in the foreign resident population in certain provinces (especially island ones) contributed to increasing house prices through their effect on demand for real estate."
Meanwhile, realty website Idealista reports that Standard & Poors recently carried out an analysis of the consequences of the coronavirus COVID-19 crisis on Europe's housing market. Results indicate that house prices are falling by 3-3.5% in Spain, as well as in the UK, Ireland and Italy.
That sounds better than the forecast of Bankinter, which predicts that prices will drop by 6% (which Idealista pointed out is in line with the estimates of the Swiss investment bank and financial services company, UBS) and a collapse in sales of up to 35%, after having already fallen 3.3% in 2019. That would bring the volume of operations in 2020 to around 326,000, which would be the lowest level since 2014—the year Spain finally began its recovery from the recession. (You may recall that the main cause of Spain's 2008-2014 economic crisis was the residential real estate bubble, which saw prices rise 200% from 1996 to 2007.)
It will be interesting to see what changes the pandemic will bring to Spain in so many areas, including in terms of house prices, sales, and the number of foreigners who buy property here.
Saludos,
Carlos
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