The Spanish real estate market has come to a halt, as has the rest of the economy in most European countries, but it is expected to resume activity in 2021 as the coronavirus crisis runs its course.
This could be one of the extraordinary measures being implemented by the Spanish government to avoid the consequences of a long-term crisis for all new housing promotions. Domestic demand from Spanish nationals and the holiday real estate market from European citizens will drive the recovery.
Concerning domestic demand, the APCE (Association of Promoters and Constructors in Spain) has already proposed to the government, along with other incentives, a reduction in VAT on the newly built property from an average of 10% in most areas to 4%.
As the crisis progresses this year and movement restrictions are lifted, the foreign holiday real estate market may experience high and low variability.
The general expectation for the year 2021
The general expectation for house prices in the coming year is a 1 – 2% increase. You can actually talk about the stabilization of house prices in Spain more effectively. There is no reason or indication that Spanish house prices will fall in 2021.
Property investment appears to be a safe bet, aided by low interest rates on Spanish mortgages, based primarily on the Euribor, which is now at – 0.263 percent, with negative values since 2016. Savings, on the other
hand, have not produced a decent return in years due to the same negative values.
According to data from the Bank of Spain, a property in Spain has a predicted return of around 9%. Earnings from the rental activity are reported to be just under 4%, while capital gains tax is well over 5%.
In an ideal scenario of a sudden rush in the property market, real estate agents are finding new innovative ways to keep customers interested and be ready to attract three types of customers:
• Buyers and sellers who have been put on hold by the economy’s complete shutdown will want to exchange contracts as soon as possible before next Autumn and the predictable return of coronavirus during the winter months.
• Investors with large sums of cash who are already losing money in other financial investments will quickly turn to the real estate market as the safest place to keep their money during times of economic uncertainty.
• Bargain hunters anticipate special price reductions in some areas as new properties are added to those already on the market prior to the coronavirus crisis, resulting in an oversupply and subsequent discounts.
Is the Spanish real estate market expected to increase in 2021?
The unresolved political issues that a fragmented Parliament will have to deal with, as well as the demands in Catalonia and the coronavirus (Covid 19) situation, are factors that may have an impact on the already fragile global economy, both in Europe and the rest of the world.
After years of little activity, the construction sector is reviving, with building permits increasing by 9% in 2021 and new developments attracting money from investors all over the world, particularly Russia and China, which
account for 60% of Golden Visa applications since the program’s inception in 2013.
SPAIN REAL ESTATE MARKET VIEW
Spain is still in the process of vaccinating against COVID-19. Simultaneously, the number of infected people is decreasing. As a result, restrictions on mobility and capacity have been relaxed in many parts of the country. Immunization of the population remains a priority in order to lift restrictions and allow tourism.
This could result in an increase in unemployment and a decrease in production capacity. To overcome this situation, the government announced a new €11,000 million fund to assist tourism, hospitality, and small businesses.
The Bank of Spain has raised its economic growth forecasts for 2021, with a 6.8 percent baseline GDP growth scenario. Simultaneously, new outbreaks of the disease are expected to emerge in the coming months, necessitating restriction measures similar to the previous ones, but with a ‘relatively limited’ impact on activity.
There is still investment liquidity in the commercial real estate market. Logistics assets are the ones that pique the interest of investors the most. Changes in consumer habits have had an impact on logistics via e-commerce.
According to the most recent e-commerce data, the value of goods sold online increased by 90% in the second quarter of 2020 when compared to the same period in 2019. When the pandemic is over, some retail will return to brick-and-mortar stores, but much will remain online due to new habits formed by consumers during the pandemic.
Of course, the real estate market is quiet, and people and businesses are taking a wait-and-see approach to the current situation. The fundamentals of the real estate market remain strong, but the supply of desirable assets in key locations is limited.
With the economy improving, the Spanish property market is seeing an increase in residential sales, consistent price growth, and increased construction activity. The Spanish residential real estate market was consolidating.
Learn more about the exact process to purchase a property in Spain here
2021 is expected to be a good year for homebuyers in Spain as first-time homebuyers are eager to find their homes in Spain after the roller-coaster of life. Spain is welcoming all from the young to old to set their homes, temporary or permanent. It is estimated that in the past year, people saved, on average, about 25% of their income which is likely to be used for the purchase of their new homes. The real estate market is looking forward to materializing this opportunity. Proper policies to support the scenario and lower interest rates are expected to be in lieu of this change. On the whole, we are looking at a new and changed real estate bloom anytime soon in Spain.
