Lucas Fox partner Tom Maidment recently spoke to Martí Figueras Martínez from the Property portal Yaencontre about the luxury property market in Spain, from defining what luxury actually means, to the outlook in the sector during 2019 and beyond.
MFM: How would you describe a luxury property?
TM: Luxury is a much overused word, especially when it comes to real estate. If you start to use a word too many times it starts to lose its meaning. Luxury real estate is defined and interpreted differently across different markets, dependent upon location, property values, quality of finish and relative levels of development. We generally class our properties into the categories of ‘mid-market’ – from €450,000 to €900,000 – and also ‘prime’ – priced above €900,000. If a property is truly special in a prime city centre location yet priced below €900,000 this could also be classed as ‘prime’. Equally, a property in need of renovation yet priced above €900,000 because of its size, location and, most importantly, potential wouldn’t necessarily be classed as ‘prime’ until renovated.
MFM: Why do you think luxury property prices have gone up so much in recent years?
TM: The property turnaround started midway through 2014. The recovery of the Spanish economy, cheap financing and historic low prices were the main drivers behind the renewed confidence in the Spanish property market, which, in turn, saw the return of affluent foreign buyers. Many were investors looking to buy in prime central city areas that generally have good potential for capital appreciation. At that time, property prices in central Barcelona, for example, were 40% below the peak of 2008 and a lot of the best properties were snapped up. Since the turnaround there has been growth in the prime market. According to Fomento, the increase in prime sales in Spain (above €900,000) in 2017 was 34% and I expect the figures to show a similar trend when comparing 2018 to 2017. Lucas Fox’s own in-house figures show a positive trend year on year with a rise of 28% in the volume of prime property transactions across all our regions during the whole of 2018 compared to 2017.
MFM: Where do your buyers come from?
TM: At Lucas Fox, the proportion of international versus national buyers tends to be around 30% national compared to 70% international. Most of our international buyers come from Northern Europe, mainly Scandinavia, the UK and France. We’re seeing increasing numbers of US buyers and also more recently the return of Russian buyers as its currency gains strength.
MFM: What is the profile of your average buyer. What are their main requirements when looking for a luxury property?
TM: The buyer of a prime property is most often a business owner, CEO, entrepreneur, property investor or sports personality. The most important factor for prime buyers is location, and location normally dictates the type of property and main features that a prime buyer will be looking for – whether that be a city centre penthouse with roof terrace or a seafront coastal property with large garden, privacy and direct access to a beach. In the case of new build properties buyers will always be looking for the highest quality materials.
MFM: Is the process of buying a luxury property the same as buying a standard home?
TM: The actual sales process is the same as any other property even with regards to mortgages – many prime buyers will be looking to take advantage of cheap finance and will look to finance their purchase. In terms of sourcing the client, this often comes through high level networking and client referrals so this is a very specialist part of the process and the main point of differentiation with a “standard” sale.
MFM: What cities or zones are most in demand from these types of buyers?
TM: During 2018, we saw our prime sales soar in Catalonia, most notably in Barcelona city and in Girona/Costa Brava where sales were up by 20% and 143% respectively compared to 2017. Around 40% of all prime sales in 2018 were in Barcelona and 19% in Girona/Costa Brava. A growing trend in the Girona region is increased demand for inland rural properties, either for private use or to convert into businesses, such as yoga retreats, cycling centres or turismo rural. In Barcelona, most of these sales were high-end New Developments in the centre.
MFM: Are re-sale or new homes more popular?
TM: In 2018 we sold almost double the number of prime re-sale properties compared to new properties. The New Development market has still a long way to go if you compare it to 2008. Official statistics show that from January to November 2018 86,348 new homes were sold across Spain compared to 30,6461 during the same period in 2007, which is 71% less.
MFM: Do you think that Spain is a good market for luxury homes in general? How does it compare to other European countries?
TM: Spain is a growing market when it comes to prime sales. Compared to areas traditionally popular with buyers of prime property such as London or Paris for example, Spanish cities offer excellent value for money. If you add to that its well documented lifestyle benefits, Spain is undeniably one of the world’s most exciting prime property markets.
MFM: What are your expectations for 2019?
TM: The prime property market will go from strength to strength. Spain is one of the world’s most politically stable countries with a growing economy, an excellent infrastructure, good communications and a lifestyle arguably unrivalled anywhere else in the world. Property prices are still competitive even at the top end of the market and with the necessary restrictions in place to prevent another property bubble, I strongly believe that Spain will continue to appeal to buyers from all over the world.