Spain property sales and prices reach new peak since crisis

Last year’s post-crisis record-breaking results for price growth and property transactions mean that Spain is back in business explains international editor for Tranio, Leigh Stewart.

The real estate market in Spain is on the up and up since 2015 according to real estate editor Leigh Stewart from Tranio, an international property broker. New data by the Ministry of Development show a five-year peak in transactions, complimented by the strongest house price growth since 2007.

Key Spain Property figures for 2015

• 8% more property transactions
• More sales in all but one autonomous community
• 1% average annual price growth
• One in five houses sold to foreign nationals

Higher prices and more sales

Residential property sales increased by 9.8% in 2015 according to Spain’s Ministry of Development, which is equivalent to approximately 33,440 signings every month. In total, 401,281 properties were sold last year, making it the highest number of transactions since 2010 and the third consecutive year of growth.

But that’s not all, the property price index also made headlines for breaking post-crisis records. House prices increased by 3.1% on average and both new and existing homes recorded new highs. Second hand property values gained 2.9% year-on-year, the strongest result since 2007, while new property gained 4.2%, the biggest increase since 2008. However, Spain’s market still has room for improvement because there were 36,000 less sales in Q4 2015 than the record Q4 2010 period.

More foreign buyers on the market

Foreign nationals bought about 17.0% of all homes between October and December 2015, amounting to 19,482 transactions in total. Amid the struggling global economic climate, Spain has benefited from a weak euro exchange rate, which makes property cheaper for those with US dollars and British pounds. Foreign buyer activity, dominated by UK citizens, has grown over the last 18 consecutive quarters year-on-year.

Resident and non-resident transactions grew by 9.9% and 10.3% respectively in 2015. However, resident foreign citizens clearly dominated the marketplace, snapping up 18,029 properties compared to 1,453 for non-residents. These disproportionate figures can be explained by the extent of foreign expatriation and Spain’s definition of tax residence.

-> Tourism, terrorism and British buyers: Spain’s property market in 2016

According to the Association of Registrars (Colegio de Registradores), British citizens purchased one in every five properties sold to international buyers in 2015 (approximately 9,346 properties).

Tax residency in Spain

Foreigners are tax residents if they fulfil one of the two following clauses:

• more than 183 days residence in Spain per year
• main centre of activity or economic interests in Spain

For instance, a consultant who travels regularly and only spends 130 days per year in Spain, but whose spouse and children reside there, is a tax resident because his main centre of interest is located there.

At the same time, someone who lives in Spain for more than 183 days isn’t necessarily going to be taxed. For example, the United Kingdom, like many other countries, has a bilateral agreement that exempts British citizens from double taxation.

Spain’s property hotspots

Every autonomous community recorded more transactions in 2015, except for Castilla-La-Mancha, where sales fell by –0.8%. The Balearic Islands (+17.4%), Basque Country (+17.05), Cantabria (+16.6%), Murcia (+16.3%) and Aragon (+14.3%) were the most active local markets.

The Balearic Islands, made up of party island Ibiza, upmarket Majorca and quiet Menorca, have some of the highest property prices in Spain, along with the Basque Country. Another competitor for best local market, Cantabria, is no doubt cashing in on the high prices in the neighbouring Basque Country where prices are much higher.

House prices and market dynamics in the North of Spain 2015

Foreign buyers are more active in the South and East of Spain, including the Balearic Islands. The distribution of foreign home ownership is mainly determined by the proximity to transport routes (e.g., airports, roads), familiarity with the area (often through tourism) and expat pioneers who have established social circles in the area.

A price preference pattern has emerged from foreign activity that generally benefits areas with properties around the €250,000 mark like Alicante and Malaga for example. These destinations are also popular because of the easy low-cost air access.

Future trends and influencers

Second hand property will continue to overshadow new property transactions until the Spanish construction industry recovers.

Brexit is a threat to low-cost aviation that is feeding the tourism industry and the real estate market as it would jeopardise the Open Skies agreement that makes it possible for companies like Ryanair and Easyjet to operate.

Foreign currency exchange rates are a risk and an opportunity for the market. If the euro stays weak against the US dollar and the British pound is not negatively influenced by Brexit rumours, transactions should continue to grow.

Chinese investorsare active buyers around the Mediterranean and will likely continue in light of their homeland’s sluggish economy, stimulated by Spain’s “golden visa” programme.

Leigh Stewart, Tranio

Elle Draper

Elle, along with Alan, is the owner of Spain Buddy and the busy web design business - Gandy-Draper. Born a "Norverner", she then spent most of her life "Dann Saff" before moving to Spain in 2006. Elle's loves are Alan, the internet, their three bouncing dogs, good food, and dry white wine - although not necessarily in that order.