When I update our Spanish Property Market report at the start of a new year I’m always at a disadvantage of not having full year statistics to hand as the key numbers for the overseas sector of the property market are completed during the first quarter of the following year. When I wrote this analysis for 2023/24 the notaries’ figures were available for the 1st half of 2023 only, while the local and municipal statistics from the Ministry of Transport, Housing & Urban Planning (MITMA), which are published quarterly, gave us the numbers up to the end of Q3. However, although not a complete picture of 2023, the figures do give a good indication of the current trends in the overseas market and what’s ahead in 2024. I will update this report throughout the year as soon as revised statistics are published.
What I won’t be doing in this report is making a direct comparison of 2023 with 2022 as we now know how much the statistics were distorted by a post-pandemic surge of overseas buyers, leading to an all-time record of 143,629. However, as I pointed out in a recent blog that although 2021/22 statistics had the look of an overseas property market boom it was all a bit of a mirage. If you compare the total of foreign buyers during the 3 pandemic-affected years of 2020/21/22 with the total in the 3 years prior to the pandemic, 2017/18/19 they are very similar.
In reality, the overseas property market at the end of 2022 was more or less where it would have been if the pandemic hadn’t happened and the pre-pandemic upward trend had been maintained. During 2023 I heard many people comment that the market felt much quieter. Of course it did. In effect, 3 year’s worth of overseas buyers were crammed into the 18 months from July 2021, when international travel reopened, through to December 2022. However, as the statistics quoted in this report show, far from being down in 2023, foreign buyer numbers are running way ahead of 2019 and demand has never been higher.
Therefore, I think it makes more sense to make the comparison with where the current overseas sector of the property market is relative to those 3 pre-pandemic years and ignore the pandemic affected years. So, instead of an 8.1% fall in foreign buyer numbers comparing 1st half 2023 with the same period in 2022 there is a 31.4% increase when set against 2019. It seems overseas demand is stronger than ever and growing.
Where The Numbers Come From
The Notaries are my preferred source for a straightforward count of transactions numbers, with breakdowns by nationality, autonomous regions and prices per square metre. This format started in 2007 so gives an interesting overview of international buyer patterns from just prior to the 2008 market meltdown and the subsequent recovery. These are published half-yearly. We get the 1st half year results in October of the same year and the 2nd half in March of the following year.
In addition, MITMA is good for a more local breakdown by province and municipality. At these levels it is easy to spot market hotspots. Some provinces and municipalities account for a large proportion of transactions in a region with very little happening elsewhere. However, they do not count by nationality, foreign buyers are counted as a block.
In my view, stats from the Property Registries can be ignored as they count when a property is inscribed in the registry, not when it completed in front of the notary and inscriptions may be weeks or even months after completions. As a result, the Notaries and Property Registry statistics always differ and not by a little. They are usually out of sync by 20% - 25%.
I update this report regularly throughout the year and I also blog and post on social media with news and views so do make sure to follow us. To understand where the property market is it helps to know where it’s come from so I’ll start with a brief resumé.
The Notaries are my preferred source for a straightforward count of transactions numbers, with breakdowns by nationality, autonomous regions and prices per square metre. In addition, MITMA is good for a more local breakdown by province and municipality.
Where We Were
At the peak of the Spanish Property Market bubble which burst as a result of the 2008 global financial crash the highest market share attributed to overseas buyers was 8.9%. For several yeas prior to the crash Spain had constructed over 800,000 new units per year, more than the UK, France and Germany combined. The market was fuelled by cheap credit and speculation and the bubble was always going to burst at some stage. The global meltdown just helped it on its way.
Growth in the overseas sector got going again in 2012 while, in contrast, the domestic market continued to shrink until 2014. After 8 years of sustained growth by the end of 2019 overseas buyer market share had more than doubled to 19% of the overall market. Furthermore, in terms of overseas buyer numbers this sector of the market was 77% bigger than at the pre-2008 peak. In contrast, the domestic market experienced a much slower recovery over the same period. When Covid-19 arrived Spain’s domestic property sector was still 40% smaller than it was a decade before.
The pandemic more or less wiped out the overseas sector in 2020 while 2021 was a stop-start affair as there was still uncertainty about travel and lockdowns. Then came a surge in 2022 which, as already mentioned, pushed foreign buyer numbers to the highest ever recorded in one year.
Spain Needs Overseas Buyers
Whether you look at transaction numbers or market share it’s clear international buyers are an important part of the overall Spanish Property Market. For the three years prior to the pandemic the number of overseas buyers had topped 100,000. That barrier was broken in 2017 (100,116), the all-time record of 103,677 occurred in 2018 before falling back slightly in 2019 to 102,264. Then the pandemic arrived.
We now have the relevant statistics for January - September 2023. With Q4 results still to come, 96,847 overseas buyers had already purchased a property in 2023. It will have to be a catastrophic final quarter, the results of which we won’t get until March 2024, for 2023 not to beat all pre-pandemic years and by quite a margin.
Before starting to dig into the statistics and apply them to the property market and related issues it’s perhaps worth taking a look at why Spain is such a draw for so many overseas buyers.
With Q4 results still to come, 96,847 overseas buyers had already purchased a property in 2023. It will have to be a catastrophic final quarter for 2023 not to beat all pre-pandemic years and by quite a margin.
The Property Market - Why Spain?
For lifestyle Spain is hard to beat, it’s relaxed and easy-going, safe and child-friendly. Life expectancy has increased by 12 years since 1970 and at an 83.99yrs average, it is one of the highest in the world.
The climate suits all tastes. It ranges from four seasons with a proper winter and lots of snow in the north to the sub-tropical south. The micro-climate zones on the Mediterranean coasts of Andalucía have the best winter temperatures on the European mainland. Spain’s beaches, marinas and tourist boats have more Blue Flags than any other country in the world, a total of 729 in 2023. In fact, Spain has occupied the top spot every year since the scheme began in 1987.
Living well is affordable with food and drink prices below the E.U. average,(Source: Eurostat 2023). Spanish cuisine is world-class and currently, Spain has 3 restaurants ranked in the top 5 in the world. (Source: The World’s 50 Best Restaurants). For the cultural tourist Spain has some of the oldest cities in the world and 49 UNESCO World Heritage sites. This puts it in third place globally, behind Italy (58) and China (56). In November 2023, Forbes magazine reported on the annual poll by InterNations, a global community of people living and working abroad, which ranks the best places in the world to be an ex-pat. For the first time ever, the first 3 positions were occupied by Spanish cities; Málaga was ranked #1, followed by Valencia and Alicante. (Source: Forbes). Then, in January 2024, the annual New York Times list of 52 places to visit during the year, ranked Valencia at number 20. Source: New York Times).
Sports and outdoor enthusiasts are spoilt for choice. Golf, tennis, equestrianism, skiing, wind & kitesurfing, mountain biking, rock-climbing, hiking, fishing - the list goes on and on. The result is that Spain has a quality of life that’s hard to beat, appealing to both foreign second home owners and permanent residents from overseas. None of what has persuaded millions of foreign property buyers to choose Spain in the past has changed. The sun is definitely still shining.
Sports and outdoor enthusiasts are spoilt for choice. Golf, tennis, equestrianism, skiing, wind & kitesurfing, mountain biking, rock-climbing, hiking, fishing - the list goes on and on. The result is that Spain has a quality of life that’s hard to beat.
Unpicking The Statistics
There's no question, there was what looked like a surge of foreign buyers in Spain as life returned to more or less normal and the pandemic died away. However, it is now clear from the statistics that, for the most part, these weren’t new entrants to the market, mostly they were people playing catch up and by the end of 2022 the majority of the roughly 30,000 foreign buyers who went missing during the pandemic had re-entered the market and purchased.
It’s true that during the 3 pandemic-affected years of 2020/21/22 the total number of overseas buyers was up 8.7% when compared to the 3 pre-pandemic years 2017/18/19. However, the overseas market was already registering annual increases in the region of 2% - 3% for several years prior to the pandemic's arrival and if the increase in the 2020/21/22 period is averaged out, it's no more than would be expected due to normal levels of new demand of 2%- 3% annually.
I’m looking at the 2023 statistics as an indication of what the new normal might look like. If it’s the case that the Covid-19 pandemic has brought significant changes to how people want to live their lives - working from home and working from abroad are examples - the overseas sector of the Spanish Property Market may experience much higher annual growth than previously as the new normal.
The New Normal?
A total of 96,847 foreigners had purchased a property in Spain by the end of Q3 in 2023, already very close to the 102,000 average for the 3 pre-pandemic years and there’s still the last quarter to be counted and included. The overseas sector is 20.9% of the overall Spanish property market. However, the statistics also show that the overseas market is much more important in some locations than others.
For example, in Andalucía as a whole, the foreign market share of 19.3% is in line with the national average but in Málaga province, which really means the Costa del Sol, it is now 39.5% and it’s even higher in the Balearics at 41%. In the Comunidad Valenciana as a whole the foreign market share was 38.5%. But there are 3 provinces in this autonomous region and in 2 of them, Castellón and Valencia the foreign market share is very close to the national average, 22.9% and 23.6% respectively. Meanwhile, in Alicante province it’s on another scale altogether and at the end of Q3 overseas buyers had registered an astonishing 53.8% share of the property market so far in 2023.
In reality, when we unpick the overseas buyer sector we are really only looking at 6 regions. These hotspots are so dominant that the 2023 statistics we have so far show that 75% of overseas buyers bought in one of them; the Balearic and Canary Islands plus the Mediterranean coasts of Cataluña, the Comunidad Valenciana (the Costa Blanca), Murcia and Andalucía on the mainland
In reality, when we unpick the overseas buyer sector we are actually only looking at 6 regions. These hotspots are so dominant that the 2023 statistics show that 75% of overseas buyers bought in one of them.
The Nationality League Table
The MITMA statistics don’t count by nationality, foreign buyers are split into resident or non-resident foreigners groups, no further details. However, the notaries started counting foreign buyers by nationality in 2007. Prior to that we didn’t know much other than that there were lots and lots of Brits compared with other nationalities. In fact, starting in the 1960s, the British made up about 80% of all foreign buyers in Spain until around the mid-1990s when other nationalities began to enter the market in greater numbers. However, we didn’t have an official count until 2007 and in every year since then the British have been the nationality league leaders.
Although I keep expecting to see the British knocked off the top spot they are hanging in there. The nationality breakdown for the 1st half of 2023 left them in 1st place with 6,498 purchases, 9.5% of the overseas sector. The Germans were again in 2nd (5,519) and if the French with 4,926 are included in the mix these 3 nationalities accounted for 25% of all foreign buyers in the period.
What really stands out about the nationality statistics now is just how much the German and French markets have expanded in the 16 years since the nationality count began in 2007. In that year there were just 1,003 German buyers in the full year while now there are over 5,000 in a half year. The number of buyers from the United States has also shot up; just 330 in the whole of 2007 but 1,339 in the 1st half of 2023
Prior to 2007 we didn’t know much other than that there were lots and lots of Brits compared with other nationalities. Although I keep expecting to see the British knocked off the top spot they are hanging in there.
Foreign Spending Power
And it’s not just the numbers that make foreign buyers so important to the Spanish Property Market. They spend more too. Typically, foreign buyers pay more per square metre than the average for domestic buyers. As a result, the average spend by a foreign buyer in 2022 was €2,073 per m2, 33.5% higher than the domestic average of €1,553.
This trend continued in 2023; the average per square metre paid by international buyers in the 1st half year was €2,095. By nationality, the biggest spenders were the Swedish on an average €3,036pm2, followed closely by buyers from Denmark (€2,930) and Americans (€2,799). Set against the average price per square metre paid by domestic buyers of €1,574 these figures highlight just how important overseas buyers are to the property market in Spain.
In terms of overseas buyer spending power all the overseas buyer hotspots saw increases in the average amount paid by foreigners per square metre in the 1st half of 2023. In the case of Andalucía it was up 2.7% to €2,196 pm2. The Balearics increased to €3,945 pm2 and Cataluña was up 6.7% to €2,433. Meanwhile in the Canaries, which saw a double digit increase of 11.3% in 2022, it rose another 7.1% to €2,378 pm2.
The Regional Hotspots
I’ve already commented on the statistics which show how the overseas sector of the Spanish Property Market is concentrated is just a handful of regions. And within those regions it is further fragmented at the provincial and municipal levels. A good example of this is Andalucía. Not only is it Spain’s largest autonomous region it is one of the most varied. It has both Mediterranean and Atlantic coasts, a huge, mountainous interior and 5 of Spain’s most historic cities; Cádiz, Málaga, Seville, Granada and Córdoba. In addition, this one region accounts for 20% of all property transactions in Spain. So, in property terms it really has something for everyone but foreign sector activity is far from evenly spread. In reality it is actually concentrated in just a few locations.
Andalucía has eight provinces and it turns out that 28.8% of all transactions in 2023 so far have been in just one province, Málaga, which really means the Costa del Sol. And when you drill down to the municipal level it gets even more unbalanced. Although there are 208 municipalities in Málaga province, just four (Málaga, Marbella, Estepona & Benahavís) accounted for 42% of all transactions in the year so far. And of those 26,641 property transactions in Málaga province in Q1 - Q3 2023, 10,536 were by foreign buyers, that’s a 39.5% market share.
The dominance of just one province is even more extreme in Cataluña with 63% of all 2023 purchases in the autonomous region occurring in just one province, Barcelona. And looking at the Comunidad Valenciana, 71.7% of all 2023 foreign buyers in this region bought in just one province: Alicante. (Source: MITMA)
Tourism & Rental Demand
Pre-Covid, Spain’s tourism industry was continuing its seemingly unstoppable upward trajectory. 2019 finished with an all-time record of overseas visitors at 83.7m, making it once again the 2nd most-visited country in the world. Tourism contributed about 14.5% to Spain’s GDP in 2019 although in some regions it was much higher than the national average. Inevitably, Mediterranean regions and the islands depend even more on a healthy tourism sector. For example, the 45% of GDP generated by tourism in the Balearics makes it the most dependent, and vulnerable, region, followed by the Canary Islands, Andalucía, Murcia, the Comunidad Valenciana and Cataluña.
There is a link between visitor numbers and the property market and that’s due to rental demand from the approximately 35% of Spain’s foreign visitors who do not stay in hotels. Obviously, some will have their own homes, or stay with family and friends, but that leaves a serious number of people renting privately. In addition, many domestic tourists from within Spain rent privately. And, of course, property buyers in Spain have usually been tourists for years before they decide to purchase.
It turned out that 2023 was another record-breaker with a final total of 85,056,528 tourists counted and I think this was way better than predicted. I thought the 84m barrier would be surpassed but not 85m. What seems to be happening is that there are many more visitors out of the high season summer months. For example, the December 2023 total of 5.2m was 21% higher than the same month in 2019 which, at the time, was the highest December total on record. Another factor behind the big numbers is the wider spread of nationalities, with strong growth from newer markets while the traditional, long-established markets, such as the British, Scandinavian and German markets remain the leaders.
As a result of these visitor numbers, rental yields make letting a property in Spain an interesting option. And not just for the buy-to-let investor because although not all foreign owners are part-time landlords many are. They look for rental income to cover essential maintenance and running costs and taxes. Obviously there are many variables but the best gross yields can be as high as 10% and sometimes even higher for a large, top quality detached house in a prime location. Apartments and townhouses near the beach can return 6% - 8% gross, assuming a luxury interior. Typically, a quality property in a prime location will generate a higher yield in the short-term holiday market than the same property let long-term, in the region of 3% - 5% better.
However, there are always exceptions to the rule and growing demand for long-term rentals at the top end of the market can produce a gross yield similar to the short term yield. One of The Property Finders clients is seeing a 2019 purchase generating a gross yield of 8% for a one-year let. Just as the highest activity levels are at the top end of the property market so it is in the rental sector. Properties priced at €10,000 - €20,000 and up per week had no trouble finding takers in 2023 and high season weeks were fully occupied.
With the figures available so far it seems certain that 2023 is the year Spain’s tourism sector recovered to pre-Covid levels. As a result of these visitor numbers, rental yields make letting a property in Spain an interesting option.
Who Is Buying What
For reasons I have never quite understood, foreign buyers are like moths to a flame if new-build is available, even when the location is inferior. The fact is there is very little raw building land available in the very best locations, it was built on years ago. Consequently, it follows that much of the new-build activity is not in prime locations. In addition, plots and constructed square metres are being squeezed in comparison with resale product.
I realise many buyers are not looking to make a huge profit in the short-term, they’ve made a life-style purchase. However, I’ve yet to meet one who is happy with the idea of a loss even before they’ve got the keys. In fact I think some buyers have been paying such inflated prices for new build properties that they may never see a return on their investment no matter how long they hold it. The discrepancy between new-build and resales prices in the current market is as extreme as I have ever seen.
The current market in prime locations is one with a serious lack of supply, above all in the resale sector. People can’t buy what isn’t there. Even before Covid-19 arrived there was a supply side deficit in the quality resale sector in prime locations and this has been exacerbated by the increase in international buyers entering the market over a short time period without a similar surge in supply. And what they are looking for, that is, high quality properties in top condition in prime locations is precisely what is in such short supply and I don’t see the demand/supply imbalance changing any time soon.
Buying Right in 2024
My advice to potential property buyers in Spain is the same as ever. The location must always be key. Shiny new stuff, whether is a house or an apartment, something on the coast, the city or in the country, never trumps location. Always get the location right and then do the best with the available budget even if that means adjusting expectations. For example, several recent clients of The Property Finders have chosen a semi-detached property in order to stay in a really prime location. In my view, that is always the best decision. If they had stuck with their preference for detached they needed to accept an inferior location to stay in budget. Never compromise on location.
My advice to buyers in 2024 is do not obsess about new-builds, especially if not located in prime positions. Many are not. Consider equivalent resales, calculate the price per sq.m. to include any renovation if it’s needed. Then you can take an informed view on what makes the best financial sense. The result will almost certainly be a lower price, a bigger property and, most important of all, a superior location. When I am assessing the right price for my clients I prefer to work with prices per square metre and pay less attention to asking prices. It’s then much easier to make comparisons between similar properties.
Don’t buy anything that is blighted. Roads tend to get busier over time so if it’s noisy now it will only get worse. If there is a mobile mast in view assume there will be more as the tendency is for them multiply. Electricity pylons are also a big no-no. We can assume new housing will increase in the long term. So it's essential to be aware of local planning issues and what might be in the pipeline. Already, in some areas I can count twenty cranes while standing still. If there is vacant land nearby find out with absolute certainty what, if anything, can be constructed. The selling agent saying it is green zone is just not good enough. Why risk losing a fabulous view?
And finally, when I am assessing properties for my clients I always ask the following questions. If circumstances change and they need to sell quickly is the price right to enable them to do that? Secondly, is this a property for which there will always be demand irrespective of market conditions? One thing is certain; there will always be demand for top quality in prime locations. It always has been, still is and always will be about location and that will be more important then ever after the disruption of the pandemic
The location must always be key. Shiny new stuff, whether is a house or an apartment, something on the coast, the city or in the country, never trumps location. Always get the location right and then do the best with the available budget even if that means adjusting expectations. Never compromise on location.
The idea that the Spanish property market would experience a post-pandemic meltdown, similar to the market crash of 2008, was, quite clearly, wrong. In contrast, it has enjoyed increased interest, not just from the long-established markets of British, Scandinavian and other European nationalities but from all over the world. As already mentioned, overseas demand is pushing market share in the most prime locations way beyond the national average of 20%. The Spanish property market would certainly be in a very different place without overseas buyers.
The overseas property market is most active at the higher price levels and the 2023 statistics indicate that it does not seem to be unduly affected by global inflation, higher energy prices and interest rates. If anything, I would say there is a sense that Spain is seen as something of a safe haven for property investment at the present time. Interestingly, tourist boards and property developers in southern Spain recently started marketing campaigns focusing on the region as a warm winter location with the potential for lower energy costs.
The domestic and overseas property markets in Spain have always been disconnected. This became even more evident during post-2008 recovery. The overseas sector was already growing again while the domestic sector was still declining. The near-collapse of the Spanish banking system and consequent mortgage drought brought the domestic market to a virtual standstill. In contrast, overseas buyers were cash-rich and no bank was going to lend to them anyway.
I see this disconnect will differentiate between the two sectors for the foreseeable future. Spanish buyers are more mortgage dependent and therefore, exposed to higher interest rates. Foreign buyers at the upper levels of the market rarely need a mortgage. It’s true that many opted for a fixed-rate, long term loan in recent years but not because they needed it. They were just such good deals and made financial sense. However, for the time being, the higher Euribor interest rate, around 4% at the end of 2023, in contrast to being negative between 2015 and 2021, make them less attractive. In addition, Spanish banks are currently less keen on lending to borrowers whose earnings are not in Euros.
And as to where prices are going in 2024, it really comes down to the demand/supply imbalance. The current market in prime locations is one with a serious lack of supply, above all in the resale sector. Even before Covid-19 arrived there was a supply side deficit in the quality resale sector in prime locations and this has been exacerbated by the increase in international buyers entering the market over a short time period without an increase in supply. And what they are looking for, that is, high quality properties in top condition in prime locations, is precisely what is in such short supply and I don’t see the demand/supply imbalance changing any time soon. I had hoped that the higher prices being achieved in the resale market would tempt more sellers into the market. alleviating the supply-side deficit somewhat, but that doesn’t seem to be happening so far.
Nevertheless, if you buy at the right price in a prime location, Spanish property is still relatively affordable. There's potential for substantial capital growth in the medium term and excellent rental yield potential. The sun continues to shine and the quality of life is rated one of the best in the world. And there’s no doubt in my mind that with the WFH and WFA options becoming a reality for many more people post-Covid, that home will be in Spain.
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