February 2015 Archive

Spanish Property News

Costa Blanca and Costa del Sol leading market recovery
Data for 2014 showed that it was the year that the Spanish property sector stabilised after the turbulent years of crisis which it had endured since 2008. When looking at this data it becomes evident that two of the provinces benefiting most from the upturn are Malaga (Costa del Sol) and Alicante (Costa Blanca).

In 2014 only the provinces where Spain’s two major cities are located (Madrid and Barcelona) saw more property sales than Alicante and Malaga. The provinces fared even better when looking just at new-build sales with Alicante in second place with 9,985 sales and Malaga in third with 8,661.

The two coastal provinces are benefiting from the incredible rise in the number of foreign buyers which has been witnessed over the last few years. Foreign buyers now make up 13.88% of the market (Q4 2014) and many of them look no further than the Costa Blanca and Costa del Sol which are undoubtedly Spain’s two most recognized coasts internationally.

As the new-build sales figures suggest, the two coasts are among the only areas of Spain where developers are building new projects. The Costa Blanca South has seemingly already shaken off the shackles of the crisis and has become an epicentre of new construction with developers now starting to increase prices in areas such as Orihuela Costa.

The Costa del Sol was also one of the first areas of Spain to start seeing signs of positivity in its property sector. The coast, which is driven by the allure of destinations such as Marbella and Fuengirola, is now reported to have a lack of new-build property with demand outstripping supply in certain areas.

The future looks even brighter due to the diversification of the foreign market which has occurred since the crash. The British market remains strong with an 18.62% market share in Q4 2014 but does not dominate as it once did with the remaining 80%+ of the market being spread across numerous nationalities.

Foreign markets with huge growth potential have also started to show interest in Spanish property with Russian buyers becoming a prominent force over the last few years and the Chinese also increasing their share of the foreign market to over 4% in the last quarter of 2014 which bodes well for the future.

Also the more traditional markets are picking up with the British increasing their market share from 18.06% to 18.62% from Q3 to Q4 2014, and the Germans from 6.45% to 7.25% in the same period. All this paints a positive picture of the Spanish property sector: a picture that should continue to improve over the coming years.

INE releases positive sales data for 2014
The Spanish National Statistics Institute (INE) has released its data for sales made in December 2014 and its round up of data for the year of 2014. Results are extremely positive with sales up by 15.7% year-on-year for December and a 2.2% increase being recorded for 2014 as a whole.

The annual increase ends years of extreme decreases in the number of sales of Spanish property with sales dropping by 18.1% in 2011, 11.5% in 2012 and 1.9% in 2013. A total of 319,389 homes were sold in Spain during 2014 which is down 59% from the peak in 2007 when 775,300 homes were sold.

Data shows a clear split between the first and second halves of the year with sales rebounding strongly in the last six months of 2014 and double digit year-on-year percentage increases in sales have been recorded from September onwards (September +13.7%, October +16%, November +14% and December +15.7%).

Re-sales were the driving force behind the increase in sales and made up 63% of total sales with 199,943 transactions up 18.4% on 2013. New-build performed badly during 2014 and accounted for the remaining 37% of sales with 119,446 transactions, a figure that was down by 16.9% on the previous year.

The Spanish regions which recorded the strongest sales increases in 2014 according to INE data were the Balearic Islands with an 18.5% increase, Navarra: +13.9% and the Canary Islands: +12%. The largest declines in sales were registered in La Rioja: -25.1%, Castilla-la-Mancha: -12.6% and Murcia: -6.3%.

The annual change for other important regions was as follows – Madrid: +6.9%, Catalonia: +3.8%, the Valencia region: +2.5% and Andalucia: +0.3%. The highest number of transactions per 100,000 inhabitants was in the Valencia region with 1,182, it was followed by the Balearic Islands: 1,043 and the Canary Islands: 1,015.

Banks increased transaction volume and value in 2014
Although Spanish banks continue to hold large portfolios of property on their books, the rate at which they are being removed is increasing. In 2014 listed Spanish banks sold and leased a total of 86,726 properties which marks an 18.7% increase on 2013. The total value of these property transactions was €13,619 million, up 6.4% on 2013.

Caixa Bank recorded the most impressive numbers with 23,400 property sales and leases, 35,870 if including those made through developers supported by the bank. The value of these transactions was €2,512 million although this rose to €5,432 if including sales and leases made by third parties.

The bank seems to have benefited from its focus on leasing a large number of its properties. Rentals accounted for €1,132 million, 45% of the €2,512 million in direct turnover made by the bank from property. The results provide further evidence of the strengthening of the Spanish rental market and the possibilities available in the buy-to-let sector.

Other major banks with significant transaction volumes in 2014 were BBVA which shifted 23,069 properties for a total value of €1,932 million and Banco Sabadell (Solvia) with 16,172 properties for €2,774 million. The banks will hope that 2015 will see similar success and allow them to move on even larger amounts of their stock.
Permission to re-publish granted by Fuster & Associates.

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Posted by on 02/19/2015 09:01:00

Property News

Profitability of Buy to Let increasing in Spain
Purchasing a property as a buy-to-let investment is growing in popularity in Spain and data released by the property portal Idealista reveals that it is also becoming more profitable. The study, based on Q4 2014 sales and rentals price data, shows that residential property now offers on average a 5.3% annual yield up from 4.7% in Q4 2013.

In 2014 we published an article on the conditions in the Spanish property sector which seemed to make it a prime target for buy-to-let investors. This new data backs up this theory and makes purchasing a property in Spain as a buy-to-let a viable option and one which foreigners may choose in order to take advantage of current low prices.

This investment vehicle could be of particular interest to younger first-time-buyers from countries such as the United Kingdom, Belgium and Sweden where in many cases they are priced out of the market. A Spanish buy-to-let property could be an ideal way to get onto the property ladder and begin to build capital.

Some UK pensioners could also be looking at this as an interesting opportunity. The UK government will enact pension reforms this April which will allow pensioners more freedom to use their pensions as they wish including cashing them in as a lump sum. This should lead to more pensioners searching for investments with stronger returns than annuities or bonds.

Looking at the Idealista data in more detail one can see that the provincial capitals of the major tourist provinces generally offer stronger than average returns for investors. Alicante offers a 5.4% yield, Malaga: 5.3%, Palma de Mallorca: 5.6% and Las Palmas de Gran Canaria an impressive 5.9%.

These figures are better than those for Spain’s two major cities with yields in Madrid at 5.1% and in Barcelona at 4.7%. Office property offers even higher yields for investors at an average of 6.7% with yields for retail property at 6.9%. Garage space is currently the worst performer with average yields of just 3.6%.

Chinese investors looking for exclusivity, quality and professional management. Since the Golden Visa was launched in Spain demand from China has risen although perhaps not at the rate people were expecting. However, the vast potential of the Chinese market and the steady growth in the number of Chinese buyers over the last couple of years makes it a market that is worth pursuing for Spanish property professionals.

There are two main types of Chinese buyer, those that are looking to relocate permanently to Spain and are therefore interested in purchasing apartments close to the centre of large cities and those who are looking at the property solely as an investment, whether this be to obtain the Golden Visa or not.

The second group of Chinese buyers will not only have a larger budget but also a broader scope in terms of the location of the property and will look at it in terms of its rental potential and potential capital growth. This type of Chinese buyer will look for property situated either in prime areas of major cities or areas of the coast/mountains in which demand is highest.

Mr Fan, a Chinese employee at the agency Grupo Inmobiliario Alting, believes that Chinese clients are more demanding than other nationalities and value quality of service above price and even product. He says in an interview with news portal Inmodiario that the Chinese want the process to be transparent and for the agency to be able to offer a full service.

Therefore they prefer agencies that have Chinese staff and can provide legal services in Chinese, either directly or through a partner, and also want the agency to be able to provide interior design, the option to purchase additional products/features for the property as well as post-purchase services such as property management.

The type of property preferred by Chinese investors are apartments of 2 or 3 bedrooms, either new-build or unique re-sales, with strong rental potential and priced at ?500,000 or above. Some also have more specific requirements such as only considering properties which are south facing due to Feng Shui.

Registry statistics for Q2 2014 showed a 45% year-on-year increase in the number of Spanish property purchases made by the Chinese. Their percentage share of sales to foreigners is also on the increase with Chinese buyers representing 3.95% of all sales to foreigners in Q3 2014, up from 3.31% in Q3 2013.

This suggests that, although the Chinese may be more demanding in terms of what they expect from property sector professionals, it is worth catering to their needs.

Moody’s and Eurostat see positives in Spanish property sector
The credit ratings agency Moody’s and the European Union statistics institute Eurostat see Spanish property prices as having bottomed out. According to Eurostat the price of property in Spain increased by 0.2% in the third quarter of 2014 while Moody’s believes that price data is improving in line with the strengthening of the Spanish economy.

Fernando Encinar, Head of Research at Idealista, a major Spanish property portal, believes that prices have now completely stabilised in prime areas where there is interest from investors. However, he sees prices as still having further downside in many spanish provinces although price falls will be minor.

Moody’s sees mortgage default rates as having already hit maximums in Spain as the country’s economic environment improves. Spain’s economy is now growing, unemployment is on the decline and consumer confidence is rising: all factors which will cause the number of evictions due to non-payment of mortgages to decrease.

Meanwhile the Eurostat price data for Q3 2014 showed Ireland leading the increases with a 6.2% rise followed by Latvia (4.9%) and Croatia (4.7%). Spain’s increase is a relatively small 0.2% but the fact that Eurostat is also recording rising Spanish property prices shows that there is now a wide consensus on price stabilisation in the country.

Mortgage concessions still on the rise
Data for November from the Spanish National Statistics Institute show mortgage concessions as having risen by 14.2% year-on-year. This strong increase marks the sixth consecutive month of double digit rises after concessions rose in June (19%), July (28.8%), August (24%), September (29%) and October (18%).

Mortgage statistics are important in determining the health of a country’s property sector and the impressive rebound in the second half of 2014 is evidence of the Spanish sector’s return to health. Data for the first 11 months of 2014 reveals a year-on-year fall of 0.2% on the same period of 2013 showing an annual stabilisation in concessions.

November saw a total of 15,900 mortgages granted worth a total of ?1.666million, a figure which is up 12.2% on November 2013. The average value of mortgages conceded during the month did fall however, and was down by 1.7% year-on-year to ?104,817. Concessions were down on October by 10.1% with total capital lent down by 5.6% on the previous month.

The Spanish regions which registered the highest number of mortgage concessions for November were Andalucia with 3,183, Madrid (2,565), Catalonia (2,264) and the Valencia region (1,743). Only three regions recorded year-on-year decreases in concessions and these were Cantabria (-24.2%), Galicia (-17.1%) and the Balearics (-12.7%).
Permission to re-publish granted by Fuster & Associates.

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Posted by on 02/05/2015 09:08:00