Just look at the figures…
According to the latest figures, foreign buyers of property in Spain are returning in droves. Scandinavian buyers are up by 450% compared with 2006, for example. That is the outlier but all other countries, that matter in numbers for the Spanish Property Market have increased, some greatly, except one country, the UK.
The British are back into the Spanish Property Market now but not in the same numbers as in the period before the great crash of 2006-2008. There are various reasons for this and one of them makes the UK a special case. However the tendency is up and with the UK economy and unemployment figures showing positive signs we can expect the latent demand to increase even further over the next few years.
British buyers are still down by 76% against the numbers before the crash but there are certain factors that suggest the UK is a special case.
The question is: Why are the figures not as high?
Firstly, there can be no denying that the buying power of the pound is key. The pound fluctuated mostly between 1.45 and 1.50 euros to the pound for almost the whole of the early 2000’s. When prices on Spain became unsustainably high in 2006 British buyers started falling in numbers but then they fell off a cliff in 2008 when the British government effectively devalued the pound in two months due to the collapse of Lehman Brothers to avoid the worst of the Great Recession.
When you buying power goes down from 1.50 to 1.06 euros to the pound in a couple of months demand is crushed on large purchases such as homes abroad. Pensioners living in Spain, on a fixed income ,suffered greatly leading others to worry about how they would manage in a newly perceived more expensive country.
Secondly, Spanish developers targeted British buyers above all others prior to 2006. It was an easy market to target. British buyers had no problems getting credit to purchase, compared to German buyers for example who needed much greater levels of their own money to invest, and developments were marketed as “Blackpool in the sun”, giving the cultural reference that British buyers appreciated but was alien to buyers from Scandinavia, Germany, the Low Countries etc…
So why are the British coming back in numbers now but not in the same way as pre 2008?
Firstly, the pound has been creeping up in value against the euro reaching around the 1.40 mark against the euro recently. This allied to the price drops averaging between 50-60% from peak mean that property in Spain now is perceived as very cheap compared with prices in very recent memory. The UK is different in this respect as other countries that use the Euro only see the actual ticket price changing not what their currency can buy them.
Secondly, the huge property price crash didn’t happen to the same extent in the UK so many people have good equity in their property and when they sell up they have more money to spend in a lower price market. Equally the huge price increases in some areas, especially London where prices rose last year by around 26%, mean that a lot of buyers are cashing out and buying into a market where they require no mortgage and can live on a lot lower budget as a result. Anecdotally we have seen huge increases in the numbers of buyers from just London in the last nine months after the figures for price rises in London were announced at the start of this year. When viewed through the prism of London house prices, property in Spain is an absolute bargain even in the more exclusive and expensive areas.
Thirdly, the climate continues to aid Spain. The UK weather patterns are not changing greatly but people are more aware these days of the bad weather they are surrounded with and have much more easily accessible data from other countries to view. They see their friends and contacts every day with lovely sunny views over the Mediterranean and temperatures that the UK can only aspire to rarely and they get the itch, an itch they need to scratch. When allied to the price drops in Spain that itch is seen as easy to solve.
Fourthly, other countries are making it much more onerous to have a property there. Italy put a wealth tax in place for all property held in other countries for residents, making becoming a resident hazardous in the sense of it could become very expensive. France increased its capital gains and wealth taxes massively too meaning that even though prices in France are relatively low now they will continue to be that way for a long time and even if you manage to make a capital gain, over 75% of it will be taken away from you on sale. Germany continues to encourage low growth in house prices by always increasing the supply and encouraging rental above ownership, which may be eminently sensible for an economy as it is more dynamic, but is not great from an Anglo Saxon viewpoint as the house is seen as a piggy bank and way to make money through investing.
Further afield it had become hazardous to invest in many countries. The Arab Spring caused uncertainty in many North African countries and buyers are shying away, there are problems in Egypt, the Balkans are always a bit up in the air, Turkey has the issue of Syria on its doorstep and the problems in the Ukraine mean that the Black Sea was off the menu. Spain, Portugal and other countries are seen as more safe havens.
So as a British buyer why would you now be considering Spain more than in previous years? Why would YOU buy property in Spain:
- It looks as if the price drops are now levelling out because of the demand from other countries as well as the UK and the stirrings of internal demand in Spain itself.
- The pound buys you more euros than it did previously.
- Spain is a safe haven compared with many other countries.
- There is a possibility of capital gain in the future as basement prices mean that the only way is up (or at worst flatlining)
- The quality of life in Spain remains excellent for those who have money to spend.
- The cost of living in spain has actually dropped in many aspects over the last few years, deflation in the market has meant that day to day expenses are now cheaper adjusted for inflation, than a few years ago.
When will you be joining the growing demand? Tell us more below