Despite the fact that it is all doom and gloom surrounding Greece and its potential exit from the Eurozone it seems that overseas investors are targeting the Spanish real estate market. Figures this week show that foreign nationals acquire 12.2% of residential properties acquired in the first quarter of 2015 compared to just 9% in 2006. When you also take into account the worldwide decline during that period and the slow recovery it would seem to suggest that foreign investors believe there is value in the Spanish property market.
Could this kick start the Spanish economy?
As many people have mentioned, the real estate market in Spain has held back any significant economic recovery since the issues experienced back in 2008. The doom and gloom surrounding the Spanish real estate market obviously impacted the financial arena and many banks were left nursing significant losses and bad debts. So, could this ongoing recovery in the Spanish real estate market mark a turning point for the Spanish economy?
How strong is the recovery?
At this moment in time it looks as though the most popular area of the Spanish real estate market is the luxury end. This will surprise many people when you bear in mind the apparent lack of funds available at this moment in time but there is certainly strong demand. House prices in Spain fell by around 35% between 2007 and 2013 although they have since recovered 20% of the lost value.
We have also seen a number of high-profile and relatively large corporate real estate deals over the last couple of years with many investors seemingly picking up real estate assets they believe look good value in the longer term. Figures from 2014 show that of the €10.2 billion invested in the Spanish commercial real estate market more than half came directly from foreign investors with €2.5 billion coming from tradable real estate investment funds. So, there is certainly significant money behind this ongoing recovery!
Where is the money coming from?
The demographics of Spanish real estate investors has changed over the last few years taking in the likes of the Middle East, Europe, Asia and the US. The euro has been under pressure for a while now and this has attracted those from outside the European Union although the ongoing issues within Russia have made overseas acquisitions more expensive for Russian real estate investors. In summary, it seems as though when one door closes another one opens with regards to opportunities for overseas investors.
The Golden Visa
Those who follow real estate markets will be aware that the Spanish government offered a “Golden Visa” to foreign investors acquiring properties valued at in excess of €500,000. To the year ended 2014 the Spanish authorities issued 490 such visas to investors predominantly from Russia, China and the Middle East. Even though some experts were critical of the “Golden Visa” it seems to have at least assisted with the growth in demand for Spanish real estate from within the foreign investment community.