Tom Maidment is partner at Lucas Fox as well as being one of the founding partners of Lucas Fox Prime. Here he gives his assessment on the current state of the Spanish luxury property market, what motivates buyers to purchase property in Spain and why the next few years offer great opportunities for investors.
How is the residential property market in Spain evolving right now? It is at a good, critical moment?
Confidence has been returning to the Spanish property market since the start of the recovery midway through 2014 after 6 years of ‘La Crisis’ following the crash in 2008. The Spanish property market has continued to grow throughout 2018 with 395,534 properties exchanging hands in the first nine months of the year, according to the National Institute of Statistics (INE), an increase of 11% over the same period in 2017.
Idealista showed that resale property prices have continued to increase year-on-year, recording an annual increase of almost 8% at the end of the third quarter of 2018. Although prices are still some way below the peaks seen during the boom, they are significantly higher than the levels at which the market bottomed out. The key cities (Madrid, Barcelona and Valencia) are recovering particularly well followed by desirable second home coastal destinations such as the Costa Brava, Ibiza and Marbella. There’s also been a rising number of building licences being granted, with supply of new-build stock looking set to increase in the months and years ahead. This reflects the confidence that the construction sector sees in future growth of the Spanish property market.
Spain is also on track to be one of the fastest growing economies among developed countries. Growth during 2018 is currently predicted at 2.6% by the IMF, significantly higher than Germany, France and the UK. In 2019, it is expected to grow at 2.2%. The predicted growth is expected to fuel job creation and help bring down unemployment from its current rate of 15.3% to below 12% by the end of 2020.
Where are the key regions for the luxury property market?
Mainly Barcelona and Madrid. In Barcelona the districts of Eixample, Sarrià-Sant Gervasi and Gràcia are the key luxury districts whilst in Madrid the main luxury districts are Salamanca, Chamberí and Justicia. Other luxury areas include the Balearics, Marbella, Girona/Costa Brava, Sitges and certain areas of Valencia (Eixample/Puzol).
What are the main motivations for buying luxury property in Spain?
There are a number of reasons why buyers invest in prime residential property in Spain. The most common motives being for lifestyle reasons and as a long-term investment – and, more often than not, a combination of the two. Spain’s exceptional climate, its superb infrastructure and accessibility, its cuisine, its rich and diverse culture and its stunning and varied landscape are all factors that combine to offer a quality of life that few other countries can rival. The country is also considered safe, economically sound and, in general, politically stable, making it a low risk investment opportunity. Prices are also lower that in many other countries located both within and outside of Europe.
Which nationalities are buying luxury properties? Are Latin American buyers continuing to purchase property?
The Latin American market is still an important market, but we also noticing a lot of interest from the national market and from all over Europe. More and more US clients are interested in property in Madrid.
Are property prices in Spain lower than in other countries?
Yes, high-end property even in prime city centre areas of Barcelona and Madrid is still significantly below the prices of other major European cities, such as London, Paris and Berlin. This is another factor that makes the Spanish market an attractive investment hub for both EU and non-EU luxury residential property investors.
Who are the main property investors currently active in the Spanish market?
There are several international funds currently active in the Spanish market, including Blackstone, Cerberus, Europa Capital, LoneStar and Apollo. Spain is still a very favourable country for investment given its healthy economic growth, stability and popularity among second home buyers.
New Developments in Madrid
€645,000 (€7,413 per square metre) to €2,983,000 (€8,105 per square metre)
€810,000 (€9,875 per square metre) to €1,990,000 (€9,900 per square metre)
New Developments in Barcelona
From €995,000 (€7,834 per square metre)
€850,000 (€6,538 per square metre) to €925,000 (€7,115 per square metre)