Since the economic downturn of 2008, property prices in Spain have fallen around 30%.2016 looks set to be the year that the Spanish property market finally ‘bottoms’ out and sees a 2% rise according to the rating agency Standard and Poors. Central to this recovery, will be Spain's continuing robust economic recovery into 2017, which is seeing steady improvements in the countries desperate unemployment levels and rising middle-class household income.

1. Home Personal Overseas Properties
2016: A good year to invest in
Spanish property?
Since the economic downturn of 2008, property prices in Spain have fallen around
30%.2016 looks set to be the year that the Spanish property market finally ‘bottoms’
out and sees a 2% rise according to the rating agency Standard and Poors. Central to
February 18th, 2016 Author: Natasha Wood RSS-Feed
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2. this recovery, will be Spain's continuing robust economic recovery into 2017, which is
seeing steady improvements in the countries desperate unemployment levels and
rising middle-class household income. If 2015 will be remembered as the year when
the Spanish economy finally started to see some light at the end of the tunnel, then
2016 - 2017 could well be the year that nation emerges from that tunnel, and finds
itself on the path to stable economic growth. Before we get too optimistic though,
we should be under no illusions that the Spanish economy still has significant
structural problems, public debt remains stubbornly high and while market reforms
and investment in innovation are increasing, there is still a long way to go before
Spain’s economy can really declare itself on the road back to health. This being said,
foreign investors, who once shunned the Iberian nation for its toxic mix of free falling
real estate values, debilitating unemployment levels, and troubled banking sector,
appear to be staging a return!
Good signs from International buyers
The Spanish property market has always been heavily influenced by international
buyers, with an estimated 18% of the market believed to be from overseas
investment. In some regions such as Marbella and Alicante the figure is over 50%.
Spain's recent economic woes have been compounded by a reduction in overseas
investment in recent years, but 2015 saw transaction numbers, mortgage approvals
and prices all move in the right direction. While certainly, there is now room for
optimism, the market does remain fragile, as a reduction in mortgage approvals and
transaction towards the end of 2015 revealed. Even the most pessimistic of analysts
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3. out there though, are likely to concede, that in all likelihood, the property market has
at the very least, bottomed out.
Regional Variation
Clearly breaking down the regional variations provides more of an insight into exactly
what’s going on within the Spanish property market. Last year the majority of
property transactions in Spain occurred on the Mediterranean coastal regions, the
Canaries, and the Balearics with overseas buyers accounting for 30% to 60% of all
purchases. Even within these regions there is significant variation in terms of the
pace in price change. For those looking for an investment opportunity with a slightly
smaller budget though, and a greater degree of flexibility on location, areas to the
north and south of Valencia are proving an increasingly attractive option. Along with
being located near three stunning coastal locations, the recent opening of Castellón
airport makes this region all the more accessible. Should more airlines connect with
this airport (and there is no conceivable reason why they wouldn’t!), its well within
the realm of possibility that prices in the region will rise.
Spanish property still a good investment?
When looking at the Spanish property market from an investment point of view. The
fact prices have finally ‘bottomed’ out and are on the rise again after all those years,
should be weighed up against the price fall from peak of 30%. Assuming Spain
remains a desirable destination for tourists and foreign investment, and assuming the
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4. Spanish economy can maintain a stable growth rate, there is real potential for capital
growth in the market. 2015 proved an impressively strong year for rental yields,
particularly in high end, furnished properties located on prime coastal locations,
where seasonal occupancy was at 100%. It’s worth remembering, that while the
property and location is of course important, it should not be the sole focus of your
thought process when considering investment opportunities. Assessing whether long
term or short term lets will present more opportunity in terms of higher yields, will
also be influenced by the region. It may well be, that the best option for optimizing
returns on your investment, is short term holiday lets, which take advantage of strong
seasonal demand. However, some regions have now legislated against short term
holiday letting (Barcelona) due to pressure from hotel lobby groups and unhappy
locals. With region like Andalusia (where returns on investment have traditionally
been impressive), potentially set to follow, be advised to do all your research on this
issue beforehand!
Forex volatility set to continue in 2016
The pound has been up and down like a yoyo against the Euro since the start of the
year, complicating life for all those would be British buyers of Spanish property. So
dramatic has this volatility been, that Sterling has already surrendered the gains that
it enjoyed last year against the Euro. There is a number of reasons behind the
volatility we are seeing, with an increasing spectrum of global pressures continuing
to dominate the markets. Falling commodity prices, the collapse in the price oil and
the Chinese stock markets crashing all in the first few weeks of 2016 have sent the
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5. currency markets into turmoil. With the uncertainty of the UK’s European Union
referendum coming up this year as well, expect a sluggish performance from Sterling,
at the very least over the short term.
Overall, the tide does appear to be turning for Spain's real estate market. The
encouraging signs of recovery appear to be instilling confidence once again in those
all-important foreign buyers. How long this confidence lasts though, will depend on
how long the recovery lasts, and while there is plenty room for optimism, the
challenges that lay ahead for Spain, should not be underestimated.
About the Author
Natasha Wood
Content Marketing Executive
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