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