Spain has historically always been dependent on tourism and real estate. Everyone saw back in 2008 how the Spanish economy fell apart after relying too much on ahighly unstable housing bubble. Millions of jobs were lost and the situation of the nation was critical.
Nowadays at the (seemingly) last stages of the pandemic, many fear that the country might be depending once again too much on construction to create employment and get the economy back on its feet, however statistics show that both prices and production levels are much lower and stable than what they were before 2008.
If there is a real estate bubble coming, it still has way to go.
What Covid has changed
The pandemic has affected us in many ways, including our consumer habits. In real estate this has meant that buyers insist much more on finding a property with a garden, terrace, swimming pool and some private space to put a desk in and set up a home office.
This might sound obvious but it is particularly relevant in the case of Spain because: 1) it is a developed country that has not prepared its infrastructure for digitalization and remote working; 2) it is one of the sunniest and most outdoor-friendly nations in the world yet over 60% of the population lives in flats, the highest number in Europe after Latvia and Switzerland. This points to a huge potential demand of detached houses and villas and pushes developers to build bigger and more spacially efficient apartments.
Despite having dramatic overall effects on the economy , there were many people who could still work and keep saving without having their usual spending temptations. Although real estate investments are not minor financial decisions, it is true that these middle classes who have done well during the lockdown had been gathering the momentum to plan their purchase once the situation improved.
Nevertheless developers have been smart enough to prepare an abundant supply of properties of every kind to keep up with the higher demand. But as the recovery goes on it is hard to anticipate if this little inflation in the sector will maintain such a soft evolution in the long run.
Another factor to bear in mind is the external demand which has seen a huge increase of Chinese citizens, followed by Russians, as the most frequent applicants for Spanish Golden Visas.
The Governmental intervention
Given that rental prices are showing an upward trend that clearly outpaces the properties for sale, the government has intended to limit the speed of this increase – especially in the big cities that experience tougher gentrification at their cores.
However, this regulation is not likely to take place, and if does it will likely be very weak. This is a green light for investors as it grants positive and unthreatened returns on investments.
Besides, the expansive economic policies that are being implemented at the national level, reinforced by the massive flow of European funds addressed to impulse the Spanish economy, tend to strengthen the local purchasing power and sustain the internal demand, which amounts to approximately 95% of real estate purchases in the country. This, together with the historical low interest rates (which ease financing of projects and consumption) and the common European currency (the euro, that impedes manipulation of currency), makes of Spain a very powerful and secure market.
Opportunities for investment
Both for residential and commercial real estate, Spain is offering in this post-Covid context a great investment potential.
Even along the highly-demanded Mediterranean coast, properties are relatively cheap to buy (and finance) at the moment. Many small coastal cities are growing fast, making the purchase of real estate at their outskirts a very profitable strategy in the mid-term.
Moreover, rental income offers very attractive opportunities since prices are steadily increasing and no governmental limitations are likely to occur. It is worth noting that commercial properties are offering generally higher returns on investment, whereas properties in the big cities (such as Madrid and Barcelona) are offering the lowest on average.
The Mediterranean Coast remains overall at the top of the most demanded area in the country to both invest and settle in.