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Expats seize the day amid Spain’s property market uncertainty

Home prices are still dropping across the country. But foreign buyers need to read carefully between the lines of the figures and forecasts being offered.


Spain's Costa Brava

Spain’s Costa Brava: in the sights of cashed-up Scandinavians.

With so much uncertainty in the Spanish property market, buyers are unsure whether property prices reflect what is really happening or whether it is a case of political propaganda putting on a good face, forum gossip from disgruntled boom buyers, or simply optimistic price-setting amongst hopeful sellers.

The picture is further confused by demand factors and international interests that create differing influences in each of the local property markets across the country. What is happening in Barcelona, Ibiza or the Costa Brava, for example, may not be what is happening in Madrid or Marbella. Expat influences in property also differ from the demands and influences of local buyers.

“The property markets in Barcelona, Costa Brava, Ibiza and Mallorca each show that a significantly different set of factors is influencing demand than can be seen in national averages,” said Alex Vaughan, director at the real estate agency, Lucas Fox International Properties, which has released half-yearly market reports for its main sales regions.

“What we saw in 2012 is that in the second half of the year, prices began levelling off and international buyers were quick to pick up the best-value properties: whether they were luxury lifestyle villas or bank-owned stocks that will require renovations in order to take advantage of their prime location.”

Expat buyers are a key demographic for the agency, which deals in luxury properties aimed at international investors.

In Catalonia, British buyers, for example, are predominantly seeking Barcelona-based properties as a rental investment in the modernist neighbourhood of Eixample or the central streets of the Old Town (Ciutat Vella and Barrio Gotico). Independent research by the Pompeu Fabra University in Barcelona last year showed rental yields for apartments in the Catalan capital were 4.1 percent – higher than in London (3.4 percent) and Paris (3 percent).

American buyers, on the other hand, were more interested in locations north of Barcelona. Sant Cugat and coastal properties around Maresme were the main areas of interest. There are more stand-alone properties in these regions which appeal to American buyers, although 2012 also saw growing interest in the high-end apartment lifestyle of Barcelona city.

Cashed-up Scandinavian buyers continue to seek a second home in northern Spain to escape the harsh winter at home. Again, the Costa Brava region was in their sights, with many drawn to the area’s generous supply of golf courses.

The Lucas Fox market reports – which use a combination of government, industry information sources along with their own sales data – aim to provide a more nuanced view of what’s going on so buyers can identify what really constitutes a bargain, and what can wait until prices drop even further. The agency, for example, has stopped using one public data source in the reports that reflected asking prices of properties, rather than final sales prices.

Of course, as it is produced by a real estate agent, readers still need to read between the lines of the sales pitch.

What is interesting is to see if what is happening at the top-end could foretell where the bargains are at the average and lower ends of the market, for other expat buyers located in Spain.

The agency used their half-yearly reports a year ago to predict that Ibiza would face increased international demand, a forecast that came true in 2012 and resulted in the island seeing average prices trend upward for the first time since the market boom-and-crash in 2007.

Potential changes to residency laws for property buyers will possibly come into effect in April. These are expected to drive greater foreign interest from China, India and South America. Amid the expected flurry of competition to buy, locally based expats who understand the market may be better positioned to know when to turn discounted stock into their new home.

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5 Comments for “Expats seize the day amid Spain’s property market uncertainty”

  1. I honestly think an element of the Spanish property crash is political propaganda amidst the fear of the large unquantifiable negatives associated with the recession in Spain.

    As a home owner here I really hope it does turn around, though there are zero doubts its a great time for investors.

    • Interesting opinion BSRSpain! Investors and expats who have a bit of lived experience on the ground here are talking about this being a good time to act, aren’t they. Costa Brava for example may see increased property values soon as French demand continues to climb and the fast rail network finishes construction. Barcelona has some great pockets that have the potential to raise in value – around San Antoni market for example.

  2. I completeley agree with the fragmented market assessment. The market is dominated by bank properties and bank policies at the moment. Some dump the product and they get snapped up, others can’t afford to cut below mortgage value. Then there’s the Sareb saying it has 10-15 years to sell the properties and predicting 15 year yields down to two decimal places for investors into the bad bank. One thing is for sure, if you know the local market and have access to the right suppliers there are some unbelievable bargains and there are plenty of international buyers – at the right price.

    • Thanks for sharing your assessment Paul. It’s true – there are some great bargains and international buyers are often the first to be clued in to that. There’s some data on rental yields and comparisons with similar properties in other markets including London and Paris included in the Barcelona market report that might be worth looking at in depth as well.

  3. The market still is very slow, but that does reflect all the negativity that surrounds the property market in Spain. Like anything that is lower than it’s retail price, properties that are clearly below market value do get snapped up extremely quickly, so being in the right place at the right time is essential. Personally, I still think prices are at a reasonable rate now but can’t see any time soon prices going up.

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