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The Spanish Housing Market post-Covid-19

STEPHANE — Mon, 11 May 2020 15:11:07 +0000

Click on any flag to get an automatic translation from Google translate. Some news could have an original translation here: News Nouvelles Nieuws Noticias Nachrichten

The Spanish Housing Market post-Covid-19: Our in-depth analysis.

This article is the fourth one, and the core of our analysis, of our dedicated reports on the Coronavirus, here is our introduction paper: What are the impacts of Coronavirus on the Spanish real estate?

Prices will come down as the economy slows. We should switch from a strong seller’s market, which means a market where sellers have the last word, to a buyer’s market, where the buyers will have the last word.

A lot of changes will take place in the Spanish real estate market in a post-Covid-19 era, here is a quick summary of our insights:

Fewer transactions for 1.5 years, around -20% in 2020
The Path to recovery will be economy dependent
Spaniards will be more “picky” when looking for housing
New criteria will become more important for house searching: space (inside and outside) and light, two scare attributes in city centres
Madrid, Barcelona, Bilbao, and Santander should remain the strongest markets
Spanish coasts and tourist areas could suffer more short term due to lower demand and higher supply
Some foreigners could decide to relocate in Spain

Of course, an important question remains for many of our international readers: when will the travel ban be removed?

In this article, we will review the impacts of the Coronavirus on the Spanish Housing Market and analyse in detail:

Expectations for the Spanish real estate market in a post-Covid-19 world?
What are hot properties for Spaniards in a post-Covid-19 world?
What are the ideal Spanish properties for foreigners in a post-Covid-19 world? Market update on foreigners activity. How can you seize potential real estate opportunities in Spain? Is it easy for a foreigner to buy while being abroad?
Are distressed sales back in Spain due to Covid-19 as in 2008?
Mortgage financing conditions update in a post-Covid-19 world

So let’s start.

What are experts’ expectations for the Spanish housing market in 2020 and 2021?

Is the real estate market in Spain back to “business as usual”?

Our understanding is that real estate agents will reopen doors on the 11th of May for general business.

What real estate business changes will be due to Covid-19?

Of course, one of the first impacts was that all house viewings were cancelled as the real estate market was frozen for two months in Spain.
A backlog of pending transactions has to be resorbed as well.

Two big trends will be seen midterm in the real estate industry

The digitalisation of the industry will accelerate. We are happy to be part of this as we facilitate the purchase of Spanish properties with our network of local partners. Of course, we are strong believers in this trend of online business facilitating transactions: real estate agents will create 3D showings, electronic signing of documents will become more common, and many other possible changes

To keep business running, the industry will have to put sellers and buyers at ease by taking measures to increase safety:
- Precautions should be taken during any interaction with people: this means, in the office or during viewings: social distancing, wearing masks, and of course regular sanitising…

- Meetings will be organised on an individual basis to eliminate groups of people coming into contact
- Viewings should be well prepared: unoccupied homes, masks and hand gel provided, lights already turned on, doors all open (even for closets) so that no touching is needed
- Signing meetings could place clients and employees in separate rooms and connect them via a video meeting
- Sellers could have a difficult time with strangers coming into their home if they are still living in it

In short, this means that the industry will have to invest more into IT tools, and people as sales will evolve and be more challenging. The estate agent will need confidence from the sellers and the potential buyers. It will take much more time than before Covid-19, and in the beginning it will require more resources.

To conclude on the real estate business changes due to Covid-19: easy times are done for the industry: it will take more time to get a seller, to get buyers, and to make it happen. While there is a lot of uncertainty in the present world, one thing that is certain is that any step will be much more time consuming now, than before.

Experts’ expectations for Spanish housing market in 2020 and 2021

In 2019, 501.085 residential transactions took place in Spain.

Unsold new homes

A quick look at the supply side of new homes to the market as this was the main issue in the 2008 crisis. The number of unsold new homes in Spain is 460,000 as of the end of 2018. (most recent data available). Read more here: Where are the new build properties available in Spain?

As 25 million homes exist in Spain, it means that about 1.8% of all the properties are unsold newly built properties. Find this statistic always updated in our “real estate Returns and Mortgages in Spain” table.

Experts expect 25% fewer transactions in 2020 and see prices decreasing up to 15% as written by eleconomista.es. Bankinter’s analyst, Juan Moreno, published on the 27th of April an article in which he estimates that the price of housing in Spain will fall by around 6%.

Our insights on the Spanish real estate market

On the demand side

The housing market will not go unscathed, as consumer confidence and a strong labour market are the two essential elements in the decision to purchase a home.

Fewer buyers will come to the market than before:

Spaniards will be less active to buy homes due to the weak economy
As prices have risen steadily for the last six years nearly everywhere in Spain, buyers are afraid to pay top prices, we think this fear will vanish quickly IF the economy recovers
Some Spaniards will want to buy a new home fitting with their new priorities, which means most of the time either buying “higher quality” housing in the city centres (bigger with outside space) or outside the city centres if they can’t afford it (but within acceptable commuting time)
Wealthy Spaniards will reassess their situation and will look for bigger properties or buy second homes outside the city centres.
Fewer transactions by foreigners short-term due to the travel ban and midterm due to the slowing economy in their home country: buying a holiday home is not an “essential” economic decision and as such will be postponed
Some foreigners could decide to relocate to Spain to enjoy a higher quality of life
Cash-rich investors will take advantage of opportunities (Spaniards and foreigners)

Read our to dedicated papers on that subject:

On the supply side

More sellers will come to the market than before:

Sellers from victims’ family of the Coronavirus
Forced sellers due to the slowing economy induced by the lockdown and the travel ban
Some Spaniards will sell their existing home for a “better” home: more light, more inside space, more outside space (terrace, garden,…) which means most of the time sell “low quality” housing in the city centres
Sellers who are waiting due to the lockdown will be keen to sell as soon as possible
As seen above, the supply of new homes is more reasonable than in 2008 but remains important

Price evolution

Sellers that have to sell quickly will need to change their mind regarding price, vs before the crisis, and what is going get deals done. Have a look at our next section: Which Spanish real estate markets will thrive in a post-Covid-19 world? for a detailed analysis by region.

Of course, this should give a negative short term bias to official property prices. Midterm, the economy will tell us in which direction the real estate prices will go. We think that the trend should remain negative up until the end of 2021.

Two strong positives to keep in mind:

Low financing rates should continue to give support to the real estate market, as you can check in our paper: Find the best Spanish mortgages
Spanish rental yields are interesting. If you want to have a longer-term outlook on Spanish real estate vs other European cities, it could be interesting to read our analysis written in January 2020: What return will you make on your Spanish Property in 2020?

Don’t miss our quarterly update on the Spanish property prices for all the top 20 Spanish cities.

Which Spanish real estate markets will thrive in a post-Covid-19 world?

Madrid, Barcelona, Valencia, Bilbao, Santander real estate markets

Yes, in the short term after the easing lockdown measures some people will be tight on cash or will need to move on and be willing to sell at a discount. For example we expect a maximum discount of 10% in Barcelona and Madrid city centres, and maybe a little more for other cities to get a quick deal done. Please remember that those markets were strong earlier on this year and benefited from a healthy (not crazy) rebound since the bottom of 2014.
There could be a real demand for rural properties outside cities with up to a 1-hour commute. They will benefit from people looking for more space while working in those 5 cities.

Prime residential real estate in Madrid, Barcelona, Valencia

We see a very minor impact for premium properties in those cities as supply is low and demand should remain high.

Interest from both wealthy Spaniards and foreigners.

Wealthy people are reassessing their life choices and going for more private spaces: Wealthy Spaniards will want to get more space as residential units are “small” even by their standards due to historic constructions in city centres.

Wealthy foreigners will reassess their life priorities as well and could decide to get more sun and buy a nice property in Spain.

Don’t forget as well, that the current prices remain very competitive in comparison to European international cities. Read our Spanish property analysis for more on that.

The specific case of the fast train “AVE” cities: Valencia, Alicante, Barcelona and Malaga

During our last two visits to these cities, we confirmed fast train accessibility with our local partners. Thanks to the fast Train accessibility, the “AVE”: 1h46 for Valencia, 2h21 for Alicante, 2h45 for Barcelona and 2h38 for Malaga; these three cities are gaining traction from people living in Madrid to buy second homes. This trend could be accelerated due to Covid-19 as wealthy people living in the capital may be looking for more space.

The Spanish Costas real estate market

Many negative cross currents are impacting those areas:

Those regions heavily rely on tourism. Regarding 2020 we have a lot of uncertainties: will the travel ban be lifted? Will foreigners be allowed to come on holidays to Spain?
The second one is that some Airbnb owners could be inclined to sell their properties, especially, the ‘mortgage financed ones’ which should bring more supply to the market.
Last but not least, a lot of new build projects are foreseen in these regions.

We wouldn’t be surprised to see big discounts on resale, higher than 15% for some deals, and some discount for new buildings as more supply is coming to the market.

Read more on that with our newbuild section in two paragraphs.

For people who have known us for a while, they will be happy if they followed our advice and invested in cities with “real” economic activity rather than pure “touristic” cities. As we can see today, this was very important advice to follow.

If you understand Spanish and want to read further on the Spanish Costas property prices, here is another article published in the Expansion paper on the 10th of May.

Rest of Spain

We think that second-tier cities will suffer more than Madrid, Barcelona and Valencia and smaller cities will suffer even more. So, we wouldn’t be surprised to see deals with discounts higher than 15% in the rest of Spain as the economic situation is bad.

Newbuild

More supply is coming to the market as the industry rebounded from the 2008 crisis for a few years up to 2019, which was the best year since then in terms of units sold. A few interesting facts:

The industry is in a much better place than in 2008: less leverage, better financing, less supply and strong players remaining
85% of units to be finished in 2020 are sold according to the president of the Spanish promoters’ association, APCEspaña, Antonio Gómez-Pintado, in the article of eleconomista.es
50% of units to be finished in 2021 are sold

This concludes our in-depth analysis of the Spanish Housing Market post-Covid-19. To end our analysis, we will cover those topics:

What are hot properties for Spaniards in a post-Covid-19 world?
What are the ideal Spanish properties for foreigners in a post-Covid-19 world? Market update on foreigners activity. How can you seize potential real estate opportunities in Spain? Is it easy for a foreigner to buy while being abroad?
Are distressed sales back in Spain due to Covid-19 as in 2008?
Financing conditions update in a post-Covid-19 world

Don’t neglect the basic recommendations to keep yourself and others safe:

maintaining a social distance of 2 m,

regular hand washing,

cover your mouth when you cough or sneeze,

avoid touching your face after touching hard surfaces where the virus can live.

Looking for a mortgage or a local expert in Alicante, Malaga, Valencia, Madrid, Barcelona,…? Ask us directly!

Follow this link to read the full pdf in Spanish on how the easing will be organized in Spain.

The post The Spanish Housing Market post-Covid-19 appeared first on How to buy in Spain.

What are the impacts of Coronavirus on the Spanish Economy?

STEPHANE — Mon, 04 May 2020 16:35:46 +0000

Click on any flag to get an automatic translation from Google translate. Some news could have an original translation here: News Nouvelles Nieuws Noticias Nachrichten

What are the impacts of Coronavirus on the Spanish Economy?

This article is the third one of our dedicated reports on the Coronavirus, here is our introduction paper: What are the impacts of Coronavirus on the Spanish real estate?

The current situation

We all know that economic activity has been stopped for about 2 months nearly everywhere in Europe. Spain was one of the first countries in Europe to be impacted by the virus, along with Italy. The government took decisive action and the lockdown started on the 12th of March, as you can see on this worldwide comparison table from the BBC. The economy is not in good shape as you can see from the “INE” press release (the Spanish Statistic office): the GDP evolution for the 1st quarter of 2020: -5,2%.

Lockdown easing

As we speak, in early May, the Spanish government looks ready to ease the “stay-at-home” policy, starting mid-May and doesn’t want to release specific dates as stated in El Pais on the 28th of April. We already know that lockdown easing will be organised in four different phases:

Phase 0 or preparation of de-climbing

Will allow some sports activities, some outside walks, and some economic activities. This just started on the 2nd of May: After 7 weeks of lockdown, Spaniards can finally exercise outdoors

Phase I or initial

partial opening of activities will be further allowed if the epidemiologic curve remains steady :

economic activities such as the opening of small trade by appointment or counter services
restaurants and cafeterias with delivery take-away will be allowed to open
agricultural activities will be permitted
sports activities (extension of previously lifted measures)
tourist accommodations without the use of common areas and with restrictions will be permitted for use

Phase II or intermediate

The partial opening of activities restricted in Phase I will be allowed with capacity limitations:

restaurants with table service and terraces can open but only up to 30% capacity

common areas of tourist accommodation will open
Large shopping centres will open with capacity restrictions

Phase III or advanced

All activities are planned to be allowed, but always maintaining appropriate safety and distance measures. Among the measures at this stage, the opening up of retail trade that would not have been open in advance, with limited capacity, bars and clubs with very limited capacity, museums and cultural shows, also with limited attendance, etc.

New normality

Social and economic restrictions end, but epidemiologic vigilance is maintained, strengthening health system capacities remains important, and self-protection of citizenship.

Here is the official website of the Spanish government for any matter related to the Coronavirus.

Bank of Spain GDP Expectations for 2020

The bank of Spain has run some simulations to check the impact of Coronavirus on the GDP: currently, the bank of Spain thinks that the GDP will decrease between 6.6% to 13.6% in 2020. In our mind, this looks conservative as 2 months of inactivity out of 12 months in a year already means a loss of ⅙… which is 16,6% of a full year…

While at the same time, unemployment will rise in Spain from the current 14,6% level.

Spanish deficit will rise as well as the state supports the economy and increases the current level of debt to GDP which stands at 95.5% as of the end of 2018. Last but not least, consumer and business confidence should take a hit which will not help the economy short term.

Travel Ban and Tourism

Tourism in Spain represents 15% of the Spanish GDP or €178 bn in 2018. Spain is the second most touristic destination in the world, with 84m tourists per year. With the travel ban, it’s not difficult to understand that the travel industry: hotels, restaurants, Airbnb and the many suppliers working to support them, will be impacted. European governments will review if borders and travel will be reopened for tourists in the summer but, as of today, nothing is sure.

Recovery shape?

A very important question is: What will the recovery shape look like?

A lot of economists tell us that the recovery will be quick, or the “V shape” because central banks are massively supporting the economy. In fact, Economists predict a V Shape rebound 70% of the time after recessions but are wrong most of the time. We doubt that the full recovery will come fast, as the boss of the Federal Reserve states. Keep in mind: ⅔ of the economy is driven by consumers, and consumers are suffering. ⅔ of the economy is carried by small businesses, which are also suffering. We were surprised to read that 40% of rental payments in April couldn’t be paid by some Americans and the number was even higher for commercial properties. At the same time, unemployment is exploding around the world.

The Spanish housing market post-covid-19

Here are a few interesting questions we think:

Will travel resume as before? Airlines will have a very difficult time and people will travel less
Will corporations rehire 100% of their personnel?
Will economic activity resume as before?

Will social behaviour resume as before?
Will outsourcing to developing countries resume as before?

We tend to answer “No” to most of these questions. We think that the economy will suffer big headwinds, that Airlines won’t be in business as usual before anytime soon… and that the crisis could expand with a domino effect. Have a look at the insights of one of the best investors over the years published in the New York Times: Warren Buffett’s Optimistic? Pessimistic? No, Realistic

As a conclusion, the economic situation will be back to normal at a slower speed, which means fewer transactions and lower prices in general, as well as more opportunities for the buyers.

Don’t neglect the basic recommendations to keep yourself and others safe:

maintaining a social distance of 2 m,

regular hand washing,

cover your mouth when you cough or sneeze,

avoid touching your face after touching hard surfaces where the virus can live.

Looking for a mortgage or a local expert in Alicante, Malaga, Valencia, Madrid, Barcelona,…? Ask us directly!

The Spanish housing market post-covid-19

The post What are the impacts of Coronavirus on the Spanish Economy? appeared first on How to buy in Spain.

What are the effects of Coronavirus on people?

STEPHANE — Mon, 04 May 2020 16:09:17 +0000

Click on any flag to get an automatic translation from Google translate. Some news could have an original translation here: News Nouvelles Nieuws Noticias Nachrichten

What are the effects of Coronavirus on people?

This article is the second one of our dedicated reports on the Coronavirus, here is our introduction paper: What are the impacts of Coronavirus on the Spanish real estate?

First, let’s have a look at the Covid-19 illness itself

For a lot of people, at least those living outside of Asia, Severe Acute Respiratory Syndrome Viruses, SARS Viruses, are a first, therefore it has a huge impact on everyone.

The scientific community is still learning about it, and because of its ability to spread from people who don’t appear to be ill, the virus may be harder to control. People may be at their most infectious before symptoms appear.

The pandemic creates a lot of uncertainties:

No vaccine as of today. The time to develop and produce a vaccine can range from 9 months, to 5 years.

The coronavirus pandemic is likely to last as long as two years and won’t be controlled until about two-thirds of the world’s population is immune as said by a group of experts from the Center for Infectious Disease Research and Policy at the University of Minnesota.
Potentially curative therapies are beginning to appear: Remdesivir of Gilead.
It is unknown whether or not you are immune once you have had the virus.
The long-term health effects on survivors are unknown.

At the same time, we learned some sure things:

Covid-19 is highly contagious, spreading across populations in days.
It’s deadly, but we are yet to determine a concrete fatality rate due to a lack of testing and surveillance.
According to the American health organisation, CDC, people with the following conditions could be more at risk for poor outcomes: People aged 65 years and older, people with Asthma, Chronic lung disease, Diabetes, Serious heart conditions, Chronic kidney disease and being treated with dialysis, and with severe obesity. People in nursing homes or long-term care facilities, immunocompromised individuals, and people with Liver disease.

So, unfortunately, Coronavirus exacerbates difficulties for vulnerable individuals even more, with their risks being much greater than younger, or healthier individuals without other comorbidities.

Second, the impacts of the Shelter-In-Place orders

The first impact was economical:

people with little financial means are highly exposed and the Spanish economy was stopped for nearly everybody for two full months.

The second impact was practical:

people had to stay and live where they were with their relatives:

No possibility to go outside except for necessary shopping
This meant living in a place with all household members 24/7. Many Spanish Children couldn’t exit the buildings for 7 weeks, until Sunday the 26th of April.
No possibility to visit/help relatives living elsewhere
Living in a place foreseen for sleeping and eating but not for other activities: many residential units are too small, without enough light, posing more difficulties for working from home…
No social contacts (inside or outside)

Depending on the length of the Shelter-In-Place orders, a lot of people suffered many indirect (psychological) impacts of this.

Last but not least, social distancing and wearing masks outside have greater impacts on people’s daily lives.

We will come back to that as those will impact the real estate market as people will change their criteria for their ideal properties.

Don’t neglect the basic recommendations to keep yourself and others safe:

maintaining a social distance of 2 m,

regular hand washing,

cover your mouth when you cough or sneeze,

avoid touching your face after touching hard surfaces where the virus can live.

Looking for a mortgage or a local expert in Alicante, Malaga, Valencia, Madrid, Barcelona,…? Ask us directly!

Effects of Coronavirus on people

The post What are the effects of Coronavirus on people? appeared first on How to buy in Spain.

What are the impacts of Coronavirus on the Spanish real estate?

STEPHANE — Mon, 04 May 2020 15:42:05 +0000

Click on any flag to get an automatic translation from Google translate. Some news could have an original translation here: News Nouvelles Nieuws Noticias Nachrichten

What are the impacts of Coronavirus on the Spanish Real Estate Market?

In this article we review the different impacts of Coronavirus on the Spanish real estate market. However, as habits and behaviours will change, many conclusions drawn for the Spanish market will apply to several real estate markets across the world.

Are we going into a big crisis for the real estate market in Spain? Is the 2008 crisis returning?

As we will see in our analysis, the situation is not the same:

Supply and demand: the current real estate market is in a much greater state of equilibrium following the rebound over the last 6 years
There is less financial leverage in the system
The market is not ‘oversupplied’ by thousands of levered promoters
Bank balance sheets are much stronger than in 2008

Read our in depth analysis for more: Are distressed sales back in Spain?

At the same time, Shelter-In-Place orders have a big impact on economies worldwide and in Spain: businesses and consumers are suffering across the globe.

How the economy will evolve in the future remains an important question as consumer income and confidence is the long term key to any real economic recovery.

To have a good understanding of the situation, it is important to first understand the Pandemic itself:

What are the effects of Coronavirus on people?

The illness itself and the Shelter-In-Place orders

After that, it is important to understand

What are the impacts of the Coronavirus on the Spanish Economy?

The current situation, easing of lockdown measures, the Bank of Spain GDP, tourism in Spain and the future recovery shape.

Impacts of Coronavirus on Spanish Economy

Before further analysing the impacts of Coronavirus on the Spanish real estate market, we can already draw three conclusions:

Spaniards will search for different properties in the future
The economy will be running at a slower speed which means less real estate transactions and lower prices in general
There will be more opportunities available. As you may know, the term ‘crisis’ in Chinese is composed of two Chinese characters: “danger” and “opportunity”.

Now that you understand What are the effects of Coronavirus on people? and What are the impacts of the Coronavirus on the Spanish Economy?, let’s discuss our research findings: due to the higher uncertainty created by Coronavirus and the weak economy, a lot of changes will take place on the Spanish real estate market in the post-covid-19 era.

Here is a quick summary of our insights:

Less transactions for 1.5 years
Prices could decrease from between 5% to 15%
The Path to recovery will be economy dependent
Spaniards will be more “picky” when looking for housing
New criteria will become more important for house searching: space (inside and outside) and light, two scare attributes in city centres
Madrid, Barcelona, Bilbao and Santander should remain the strongest markets
The rest of Spain may suffer
Spanish coasts and touristic areas could suffer more short term due to more supply and less demand.
Some foreigners could decide to relocate in Spain

Real estate investors who have known us for a while will be happy if they have followed our advice and invested in cities with “real” economic activity rather than pure “touristic” cities. As we can see today, this was very important advice to follow. Of course if you were buying a holiday property, Spain remains a hot, sunny spot with many other advantages.

Views from one of the new build project of our local partner in the Balearic Islands available now – click to view more

In our new research, which will be available by latest, the 12th of May , we will go further with our review:

The impacts of Coronavirus on the Spanish real estate market

with a focus on the following themes :

Expectations for the Spanish housing market in a post-Covid-19 world
What are hot properties for Spaniards in a post-Covid-19 world?
What are the ideal Spanish properties for foreigners in a post-Covid-19 world? Market update on foreigners activity. How can you seize potential real estate opportunities in Spain? Is it easy for a foreigner to buy while being abroad? (This part will be released at the latest on the 19th of May)
Are distressed sales back in Spain due to Covid-19 as in 2008?
Financing conditions update in a post-Covid-19 world

So, don’t miss this opportunity to gain new insights on a very important topic!

Don’t neglect the basic recommendations to keep yourself and others safe:

maintaining a social distance of 2 m,

regular hand washing,

cover your mouth when you cough or sneeze,

avoid touching your face after touching hard surfaces where the virus can live.

Looking for a mortgage or a local expert in Alicante, Malaga, Valencia, Madrid, Barcelona,…? Ask us directly!