In the aftermath of the 2008/9 worldwide economic meltdown the Spanish and the Portuguese real estate markets seemed to be amongst the hardest hit. There was a massive buildup of repossessions and to a certain extent this has overhung the market since the economic meltdown. While there are signs buyers are returning is this right across the Spanish real estate market or are buyers being a little more selective?
The Spanish economy
The Spanish economy, and to a lesser extent the overall European economy, is pivotal to the long-term recovery of the Spanish property market. Therefore, it is welcoming to see that GDP growth during the last 12 months has been the highest since 2007 hitting a figure of 2.7%. Property experts are also noticing the re-emergence of dollar millionaires the number of which has increased by 40% since 2008. This improved momentum in economic growth certainly bodes well for the future although unemployment is still at an uncomfortable level of 22% and this will obviously need to improve dramatically before we see long term sustained economic growth.
Property market investment
While there has been a general increase in interest rate across the board it is the prime locations in Barcelona, Valencia and Madrid which seem to be leading the recovery. In some ways this is reminiscent of the UK market which is dictated to by the London real estate sector. Experts are talking of pent-up demand over the last five years which slowly but surely seems to have been released over recent months. It would be foolish to suggest the Spanish property market is back on a “traditional growth path” but there are signs of growing demand.
It will be interesting to see whether the significant increase in property transactions across these prime areas continues with the number of transactions in Barcelona alone up a staggering 58% on the 2013 figure.
Is the worst now over?
As we touched on above, it seems that the prime locations across Spain will be the first recipients of increasing investor appetite for Spanish property. Even though the general overhang of repossessed properties is slowly but surely reducing there may still be many homeowners perhaps looking to downsize and reduce their financial difficulties. As a consequence, as the price of property in Spain begins to move forward there may be “stale sellers” coming into play.
Some experts believe that 2013, in hindsight, was the weakest point for the Spanish property market and perhaps offered the greatest value for those brave enough to take a long-term view. However, many believe that it is still a buyer’s market across Spain, and many areas of Europe, especially when you bear in mind the ongoing worldwide economic difficulties.
In many ways the ongoing recovery in prime Spanish property markets such as Barcelona, Madrid and Valencia is very similar to the UK market where London seems to lead the way. It may take some time for the general Spanish property market to match this growth but there are hopes of a significant recovery in the medium to long term. However, many investors are still monitoring the Euro situation which is still nowhere near being resolved on a long-term basis.