LF: What are your forecasts for the luxury real estate market in 2018? Do you think it will it maintain the growth rate of 2017?
ST: The Lucas Fox third quarter results across the group are very encouraging, showing an increase in sales volume of more than 50%. The most significant rises were in Madrid (70%) and Barcelona city (38%) as well as in Valencia and Sitges which saw sales grow by more than 100% in the first nine months of this year compared to the same period in 2016.
The average price of a prime property rose by 13%, from €709,111 in September 2016 to €802,000 in September 2017. This was due to the fact that Lucas Fox has been focusing on listing and selling homes in ultra prime city districts such as Salamanca in Madrid and Turó Park in Barcelona where prices are evidently higher. This, coupled with the ongoing property price increases has meant that we have seen the overall value of our sales has risen significantly compared to last year.
In Barcelona and Madrid in particular we have continued to register strong demand for new homes in the first three quarters of the year. Sales of new homes accounting for almost half (47%) of all Lucas Fox’s sales in Madrid and 26% in Barcelona.
We expect these key trends to continue in 2018 and beyond as the property market recovery gathers pace. We expect new homes and national buyers to account for a greater proportion of all Lucas Fox sales particularly in Madrid and Barcelona. With regards to foreign buyers, we expect sales from US, Canadian, Middle East and Chinese buyers to continue an upward trend, especially in the cities, whilst we also expect that the Scandinavians, French, Dutch and Germans will account for a bigger proportion of sales and the British a smaller proportion due to Brexit in the coastal regions such as Marbella and the Costa Brava.
LF: Which regions do you think will experience the biggest growth rates?
ST: In November Lucas Fox launched the Lucas Fox Affiliate Programme in locations, which are relatively untapped by the international market where we predict there will be significant growth in 2018 and beyond. These include the cities of Málaga and Seville, the Basque country and Galicia. A new office has just opened in Gavà Mar near Sitges and in the next few months we will open Property Lounges in Sant Cugat and Andorra.
Aside from these new Lucas Fox locations, we expect to see more growth along the Barcelona coast (Maresme and Sitges) as some buyers get priced out of the Barcelona city market, as well as the desirable areas of Salamanca and Chamberí in central Madrid which appeal to foreign investors, Latin American buyers and wealthy local clients.
LF: Who do you think will invest in luxury homes next year? National or international buyers?
ST: We expect the proportion of Spanish buyers to continue to increase in 2018. They currently represent 35% of all our total sales but in Madrid over half (53%) of all our sales were to national buyers in Q1-Q3 2017 and in Valencia 61% of our buyers were Spanish. We expect that by the end of 2018, around half of our total sales will be to national buyers. As stated previously we expect the proportion of British buyers to decrease, particularly in coastal areas, and the proportion of Scandinavian, French, German and buyers from the Benelux countries to increase as well as buyers from the US, China and Middle East.
LF: What advantages does the Spanish property market offer for foreign buyers?
ST: The Spanish property market is now in full recovery mode and offers a plethora of advantages for opportunistic buyers. Along with a growing economy, low interest rates and Spain’s obvious lifestyle benefits, Spain offers attractive property prices – up to 30% below the peak of 2007 in some areas. These prices are now rising steadily offering investors the potential of good capital appreciation. Compared to other major European cities even prime homes (New Developments for example) are considerably better value. In Barcelona and Madrid they average between €5,000 and €6,000 per square metre, whilst in Paris or London prices start at around €9,000 per square metre. Long-term rental yields in prime areas are also healthy – up to 5% in ultra prime areas such as Barcelona Old Town and Chamberí in Madrid.
LF: What are the potential threats to the sector and how will they affect its growth? How does the situation in Catalonia affect the luxury housing market?
ST: Prices in Barcelona over the last year have grown at a significant rate, but we believe they have just been adjusting to current market conditions.
In 2017 we are looking at a different set of circumstances compared to ten years ago – the construction industry represents a much lower proportion of Spain’s GDP, there’s more control of risk indicators and overall, investors are much better informed. In Catalonia, following the events of 1st October we saw a temporary dip in the level of enquiries from national and international buyers but these have already recovered to 2016 levels. Some investment buyers in Barcelona city are choosing to put their purchase on hold until after the elections on 21st December but we are continuing to close high-end deals with national and international clients. To date there has been no impact on closing prices. We believe that the most likely outcome will be a renegotiation of the conditions of Catalonia’s financial autonomy and that the market in Barcelona city property market will soon recover to pre referendum levels. In the sought-after coastal areas of Catalonia such as Maresme, Sitges and the Costa Brava we are having an exceptional last quarter, significantly up on the same period in 2016.