Sharp Fall in House Purchases by Brits in Alicante due to Brexit

29 December 2017 – El Boletín

A survey of real estate professionals conducted by the College of Real Estate Agents (API) of Alicante reveals that Brexit is having a significant effect on the real estate market in the region. The research indicates that many areas in the province, in particular along the coast, have experienced a notable decrease in the volume of house sales to British buyers in 2017 and that this trend is forecast to intensify in 2018.

The API College of Alicante points out that “traditionally, Brits have represented one of the largest groups of house buyers in Alicante, the province where the most homes and apartments are sold to foreigners in all of Spain”. Some of the Real Estate Agents are certain that 2017 has seen the lowest volume of sales to British citizens in decades”, although the situation is not being replicated with other overseas buyers.

Moreover, API’s research also shows that the decrease in sales to British citizens does not necessarily mean a reduction in the volume of purchases by foreigners, given that the gap being left by the Brits is being covered by foreigners from other countries. The report indicates that Belgians, Dutch, French, Norwegians, Germans and Russians will be the most active house buyers in 2018. People from up to 125 different countries are now buying homes in the province of Alicante.

Moreover, Brexit is not only affecting house purchases, it is also being felt in that more and more British citizens are putting their properties up for sale in the province of Alicante. In summary, more than 90% of the Real Estate Agents that work with foreigners have already felt the effects of Brexit on their operations and are convinced that the trend may yet intensify further during the course of next year.

Prices on the rise

Another conclusion from this study is that “nine out of every ten APIs interviewed are convinced that house prices in the province of Alicante will continue to rise in 2018, with increases that could range between 3% and 10%, depending on the area and type of home”. The average forecast increase in house prices amounts to around 5% in the province of Alicante as a whole.

The Real Estate Agents are also convinced that, after a year marked by the recovery of the sector, 2018 is going to be a year in which house purchases will continue to rise. “The second-hand market is going to continue to perform well, but 2018 will probably be the year in which new builds start to take off again, in towns where there is still land available”, explained Marife Esteso, President of the API College of Alicante.

In 2018, the worrying upward trend in the rental market is also expected to continue, where the gap between high demand and scarce supply, together with the diversion of homes to holiday lets, means that prices are going to keep rising. In this sense, many real estate agents indicate that the rise in holiday rentals is being driven not only by the higher returns on offer but also because holiday lets allow owners to avoid the problems of non-payment and property damage that are typically caused by long-term tenants.

Original story: El Boletín (by E.B.)

Translation: Carmel Drake

CaixaBank: Consequences Of Brexit For Spain’s RE Sector

11 September 2017 – CaixaBank Research

The real estate sector has started a new bullish cycle, as evidenced by the evolution of house purchases, which have been growing at double-digit figures for two years now. Whilst internal demand has been boosted by the recovery in employment and favourable financing conditions, overseas demand has been by no means negligible: in Q1 2017, it grew by 14% YoY.

Nevertheless, this positive movement in terms of demand from overseas buyers is masking various different trends. On the one hand, most of the purchases are happening on the Mediterranean Coast and in the islands, with foreigners accounting for more than 30% of total purchases in some provinces.

On the other hand, the evolution of these house purchases varies significantly by nationality. In this sense, the uncertainty surrounding Brexit and the depreciation of the pound are leaving their mark on the acquisition of homes by citizens from the United Kingdom, the main cohort of foreign homebuyers in Spain. In Q1 2017, purchases undertaken by British citizens decreased by 13% YoY. Nevertheless, that decrease was more than offset by the uptick in purchases made by French, German, Belgian and Swedish citizens who increased their purchases at rates equal to or more than 20% YoY in Q1 2017.

The different trends observed between international buyers have generated changes in the relative weight of each country in terms of house purchases, at the same time as reducing the degree of concentration amongst certain nationalities. Although the United Kingdom continues to head up the list of overseas buyers, purchases by that cohort have gone from accounting for 21% of the total in 2015 to 15% in Q1 2017.

Looking ahead, house purchases by British citizens may regain some of their buoyancy if the Brexit negotiations evolve favourably and the pound manages to recover some of its strength. Nevertheless, periods of significant uncertainty surrounding Brexit, or a hard Brexit, could tarnish the recovery, given that house purchases by British citizens have historically been very sensitive to economic conditions in their own country. On a more positive note, the good economic outlook for the other main home-buying countries in Spain, together with the continuation of accommodative monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

On a more positive note, the good economic outlook for the other main overseas buyers of homes in Spain, together with the continuation of loose monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

Original story: CaixaBank Research

Translation: Carmel Drake

Brexit Will Hit Spain’s Coastal Housing Market

27 June 2016 – El Mundo

The tremors of the international earthquake caused by Brexit, i.e. the victory of the “Yes” campaign in the United Kingdom’s referendum to leave the European Union (EU), will also be felt in the Spanish housing market. Especially in coastal areas, which are so dependent on British demand. The effects are yet to be measured, but all signs are that the UK Goodbye will overshadow the domestic property sector, at least in the short term.

Until now, the consequences of the possible Brexit, now a harsh reality, had been limited to a slowdown in the number of transactions and the signing of SPA contracts with annulment clauses to be invoked in the event that the United Kingdom left the EU, according to Santiago Sánchez, managing Partner at Engel & Völkers (E&V) in Torrevieja and Orihuela. (…).

“In addition, the new international environment may cause Brits to sell the homes that they already own in exchange for euros. And as we know: more supply and the same or less demand, decreases prices”, warns Sánchez, who acknowledges that the market had assumed the opposite outcome from the vote. “We were expecting a boost in activity following a “No” Brexit vote and for all of the built-up demand to be able to go ahead and make purchases, however…”, he laments.

For Sánchez, nevertheless, the problem that will penalise the housing market the most will be the bureaucractic aspects. “If the United Kingdom leaves the EU, it will become much harder for British citizens to settle down in Spain. They will have to request residence and work permits, take out private health insurance, and they don’t know what will happen in terms of inheritance and gifts, etc”, he said. In any case, the head of E&V believes that Brits will continue to weigh up the appeal of living in Spain. “I think that they will keep buying homes because they want to retire here”, he said.

On the other hand, most economists and real estate experts consulted agree that Brexit is bad news for the recovery of the (housing) sector in Spain, which had been started to gain strength, including along the coast. And it is precisely in the coastal regions where the United Kingdom’s departure from the EU will cause the most negative effects, given that Brits account for 21.3% of house purchases by foreigners, and the vast majority of those purchases are made by the sea. The experts are certain that the devaluation of the pound and the on-going uncertainty will weigh down on this buoyant purchasing activity, both at home and overseas. (…).

Meanwhile, Gonzalo Bernardos, Economist and Director of the Real Estate Masters at the University of Barcelona, is much more positive than his colleagues, and offers a Brexit analysis with a broader outlook. “In light of this emergency situation and to avoid a catastrophe on the markets, I think that the European Central Bank (ECB) will inject a lot of liquidity into the market, which means the banks will have more credit and that will drive the Spanish economy and, therefore, the housing market”, he said. “The current neoliberal EU will be completely redesigned and there will be a major reorganisation of the union to prevent any other country from leaving. We will say goodbye to the strict deficit demands for individual countries. In the case of Spain, the fine that was going to be levied on us, will become worthless”, he said. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Taylor Wimpey Sold 53% More Homes In Spain In 2015

12 January 2016 – Expansión

The British real estate company Taylor Wimpey sold 53% more properties in Spain in 2015, thanks to the recovery of the market and the appreciation of the Pound against the Euro, which attracted more British buyers.

Taylor Wimpey, which owns residential developments on the Spanish Mediterranean coast and in the Balearic Islands, sold 251 homes in Spain last year, compared with 164 in 2014. In addition, the average price paid for each property increased from €250,000 to €314,000. As a result, its turnover amounted to around €79 million, up by 92%.

Thanks to increases in the number of operations as well as in their value, the company says that the operating profit of its Spanish subsidiaries in 2015 exceeded the profit of GBP 4.2 million (€5.6 million) recorded a year earlier. The definitive financial data for last year will be announced next month.

Besides the sales that have already been completed, the property developer claims to have signed pre-contracts for the sale of a further 270 homes in Spain.

“We saw a significant improvement in the Spanish market in 2015” explained Taylor Wimpey yesterday in a statement to the London Stock Exchange. However, despite this recovery, the Group’s annual sales have not yet returned to the levels recorded in the Spanish market before the crisis. In 2006, for example, TW sold 379 properties and recorded turnover of around €130 million.

The majority of the homes that Taylor Wimpey promotes in Spain are acquired by British citizens who want to have a second residence in this country. According to data from the Association of Registrars (el Colegio de Registradores), citizens from the UK accounted for a fifth of the acquisitions made by foreigners in the Spanish market in 2015.

Spain is the only country outside of the UK where Taylor Wimpey has a presence. After recognising provisions for around €60 million between 2007 and 2010 to reflect the decrease in the value of its developments and land in Spain, the company started buying land again on the Costa del Sol and in Mallorca, where it forecast future demand from overseas investors. During the crisis, Taylor closed its operations in Gibraltar.

In the British market, Taylor Wimpey sold 13,341 homes in 2015, which represented an increase of 7%. According to Anthony Codling, analyst at Jefferies, “Taylor has had a clear strategy since the outbreak of the financial crisis – it focuses on margin rather than volume and invests in strategic locations (only)”.

The company’s share price rose by 0.62% yesterday, taking its cumulative increase over the last year to 61%. Its market capitalisation amounts to GBP 6,300 million in total.

Original story: Expansión (by R. Casado)

Translation: Carmel Drake