Foreign Buyers Boost Spanish Property Market

Despite a general slump, the Spanish property market is showing resilience thanks to foreign buyers, especially from Germany, Britain, and France.

Since July last year, the Eurozone has witnessed a sharp increase in interest rates, casting a shadow over the real estate sector, reports La Informacion.

Property sales and mortgage signings in Spain have been on the decline for eight months, with a significant drop of 23.7 per cent and 29.6 per cent in September.

Despite this downturn and the rising cost of both fixed and variable-rate loans, house prices have continued to climb, highlighting the imbalance between supply and demand in the Spanish property market.

Foreign Investors

In 2022, non-resident foreigners purchased over 90,000 homes in Spain, accounting for approximately 13.75 per cent of all transactions.

A noteworthy aspect is that a third of these purchases were financed through mortgages obtained in Spain. However, foreign buyers typically require less external financing for property purchases, making them less vulnerable to the tightening financial conditions and the surge in interest rates.

Cristina Arias, director of the Studies Service at Tinsa, notes, ‘Residential demand is reducing more slowly in the segment of resident foreigners.’

This trend is particularly evident in island territories and certain Mediterranean coastal areas, where international investors have played a significant role in the first half of the year.

High-End Market Dominated By Foreign Buyers

In the third quarter, foreign transactions made up 15.44 per cent of total sales, the second-highest in history. Despite a slight year-to-date decline, Judit Montoriol, chief economist at CaixaBank Research, observes a ‘high resilience’ in foreign demand.

The British lead in total operations with 10.11 per cent, followed by Germans, 7.01 per cent; French, 6.72 per cent.

Interestingly, Ecuadorians and Chinese are buying the most expensive properties, averaging €5,066 and €3,363 per square metre, respectively.

Stable Foreign Demand

Several factors suggest continued strong foreign interest in Spanish real estate. The aging population in affluent countries, coupled with higher pensions and savings among the elderly, plays a significant role.

Additionally, Spain’s appeal to digital nomads and its competitive edge in tourism, with favourable climate, security, healthcare, culture, and natural resources, is significant.

Despite some market uncertainties, such as construction costs and land availability, the property sector is expected to remain dynamic into 2024, though with varying intensities across different markets and product types.