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Spain on road to economic recovery

Why is Spain a hotspot for property in Europe now?

Spain’s turbulent economic crisis in 2008 led to a dramatic downturn of activity in Spain’s construction sector1.  The property shortage that followed in its wake has actually increased the demand for foreign property investors. The rate of sales has overtaken the rate of construction and this led to a staggering economic uplift in the last few years with GDP forecast reaching 2.5% in 2016 outperforming both the UK and Germany. Of course, Spain’s picturesque cities, agreeable weather and cuisine play their part in bolstering its popularity, but the numbers speak for themselves. However, there is a still a major gap between the cities and the countryside. The market share held by foreign property buyers in Spain has risen to 15.6% in the first quarter of 2017. For now, foreign investors’ attitudes remain bullish with in no sign of abating1.

For local developers in Spain, the ability to source debt since the downturn in 2008 has become increasingly problematic1. This has resulted in developers having to source their own equity at the beginning of the development cycle and in many cases, they have failed to source any debt at all. This has put many developers off due to the increasing difficulty to raise equity off their own backs.

How has factors affecting the UK property market (including the stamp duty and a possible fall-out from Brexit) impacted the purchasing / investing habits of the super-wealthy in Europe?

In the last few months the UK’s economic and property market has undergone many changes. The 3% loading on Stamp Duty rates that came into effect in April 2016 and Britain’s vote to exit the European Union in June has cast a shadow of uncertainty amongst investors that has led to speculation over the future of property investment2.

The major impact of Brexit is the weakening of the pound vs the euro, and of course the dollar. This has offered an opportunity for international buyers to purchase and invest in the UK and a significant discount, especially in prime central London where the discounts were even larger due to the previous slowdown in super-prime sales after the stamp duty change.

However, an increasing number of British investors have shown a healthy interest in Spanish properties, taking advantage of the low property rates that the country has to offer. This comes as something of a surprise, especially given the significant devaluation of sterling against the Euro2. Of course, this increased demand towards foreign investment can change since we haven’t seen the full ramifications of the Brexit vote, but for Europe’s wealthiest, a bullish market and advantageous tax regime can provide a comfortable landing for money that is looking for a home.

What is Spain doing to attract the worlds wealthy?

Although it is a tumultuous and uncertain time, Spain’s property market is booming with its popularity amongst foreign investors skyrocketing. The weather, the sea, the cuisine; these all most definitely paint an alluring picture for the world’s wealthy. Still, Brexit has generated a lot of uncertainty, especially amongst those that were wishing to relocate to Spain, and yet British demand for Spanish property has still increased by 29% year on year3.  Why? Spain’s economic crisis saw significant reductions in property prices, making way for those that have money to take full advantage of this4.  Increasing demand has offered a healthy return for those investors (and attracted others) in a currency that has fared well against sterling since the Brexit vote.

Sources

1 http://www.telegraph.co.uk/expat/property/sun-shining-on-spanish-property-market-again/

2 http://www.telegraph.co.uk/finance/personalfinance/investing/12079841/Place-in-the-sun-Where-to-buy-undervalued-property-in-2016.html

3 http://www.theolivepress.es/spain-news/2016/09/14/demand-for-spanish-property-from-overseas-continues-to-grow/

4 http://www.theolivepress.es/spain-news/2016/07/24/spanish-property-market-analyst-takes-a-look-at-life-after-brexit/

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2017-07-04T11:17:49+00:00