A save investment during the pandemic - why should you invest in Spanish property?

Were you planning to invest in Spanish property, but resigned due to the pandemic? We explain why purchasing property is one of the safest investments nowadays and advise you where to start during this special time.

 

Table of contents:

  1. The Spanish property market during the coronavirus
  2. The Spanish property market after the pandemic - what are the forecasts?
  3. The banks' forecasts for the Spanish property market
  4. Is property investment in Spain safe nowadays?
  5. Property and other types of investments
  6. How to invest in Spanish property during the pandemic?

 

The Spanish property market during the coronavirus

There is no doubt that in recent months the pandemic has completely dominated our lives. Most of us have had to change our current lifestyle, habits and plans for the near or far future. Changes started to take place in particular spheres of our lives, for which many of us were not prepared. These changes have affected many sectors of the economy, including the Spanish property market - the investors, sellers and developers. The market must adjust to the current situation. Therefore, both developers and property owners are making an effort to meet investors’ needs. For instance, leading development companies make it possible to book new apartments and order an online visit of an agent who will go to a selected apartment and then present it during a video conversation. Such a service is now also provided by our agency - we guarantee the help of an English speaking agent. Moreover, in the current situation, it is possible to book a property on much more favourable terms. For instance, it is possible to withdraw from the purchase at the loss of only part of the fee. In some cases it is even possible to recover the whole amount paid - for example, if an investor comes to see a live view of a previously booked property and it will not be satisfactory for him. It is worth noting that under normal circumstances it is rare for investors to expect a refund of the reservation fee.

 

Due to the coronavirus epidemic and the introduced restrictions, very large losses have already been recorded on the holiday property market - according to the Spanish TV station RTVE, losses are estimated at around EUR 240 million. The number of transactions also decreased significantly in the residential property sector. To confirm this, it is worth quoting the statistics published on notariado.org, the portal of the General Council of Notaries in Spain. The number of houses sold, mortgages granted and prices per sqm from March 2020 and March 2019 were compared. Of course, a smaller number of transactions should not surprise anyone - this is a natural consequence of the implied restrictions.

 

Here are the data from the period when the pandemic started in this part of Europe:

  • house sales decreased by 37.5% - the number of residential transactions amounted to 32.332 in March 2020,
  • the number of granted mortgage loans decreased by 28% and 18.446 new loans were granted during this period. In turn, their average amount decreased by 1.2% to EUR 136 991,
  • the average price per sqm fell by 2.2% and stood at EUR 1.396.

Restrictions related to the pandemic started to be implemented in mid-March, so it is important to be aware that some of the transactions were finalised even before the restrictions were introduced.

 

According to the data from INE (Spanish Institute of Statistics), the provinces of Malaga, Castellon, Huelva and the Madrid region recorded the biggest drop in property sales in March.

 

The Spanish property market after the pandemic - what are the forecasts?

Admittedly, it is currently difficult to say what the property market in Spain will look like once the crisis is over or at least alleviated. There are still too many uncertainties that hinder reliable forecasts.

 

The general mood on the Spanish property market is varied. It is very well illustrated by a study conducted by spanishpropertyinsight.com, whose aim was to analyse opinions on the potential impact of the pandemic on transactions made by foreign investors in the secondary property market. Over 600 people took part in it, including i.a.:

  • property owners,
  • professional investors,
  • people professionally involved in the Spanish property market,
  • people looking for property,
  • people planning to sell property.

 

The following conclusions can be drawn from the published results:

  • according to most respondents (57%), the Spanish property market will remain "frozen" for more than 6 months. In turn, 31% believe it will take between 3-6 months. A more optimistic version - only 12% of respondents assume up to 3 months,
  • many people participating in the survey anticipate a fall in property prices. According to 57% of them, they will fall by over 10%. On the other hand, 37% of respondents expect a smaller decrease, not exceeding 10%. Only 6% of those surveyed do not predict any impact of the pandemic on prices. Of course, it must be taken into account that a specific region of the country also has a huge impact on the development of property prices,
  • for obvious reasons (quarantine, closure of national borders), many respondents expect at least a temporary decrease in investment interest among people from abroad. As many as 76% of the people taking part in the survey stated that this state of affairs would continue even for a year or two after the pandemic. In turn, according to 17% of the respondents, the crisis will not affect the interest of foreigners in Spanish property and after its completion they will again be willing to make investments. The least optimistic version - a total decrease in property interest among foreigners is assumed by 7% of respondents,
  • when asked about the likely behaviour of buyers in the current situation, respondents indicated the following options. Investors planning a property purchase in Spain will wait for the prices to drop (52% of respondents), will resign from purchasing property this year (26% of respondents), will wait until travelling is deemed save again (20% of respondents) or will completely abandon their investment plans (2%).
  • asking about the possible behaviour of property sellers during the pandemic, resulted in the following answers: the sellers will not change their plans (41% of respondents), they will take the offer off the market for the time being (38% of respondents), they will lower the property price (16% of respondents) or completely resign from selling (5% of respondents).

It needs to be said that the survey has been conducted at the beginning of the coronavirus pandemic. Therefore, as the situation evolves, the opinions may and sure will be subject to change. However, it is a good reference point for the initial forecasts for the Spanish property market after the pandemic.

 

The banks' forecasts for the Spanish property market

The representatives of the Swiss UBS bank and the Spanish Bankinter have assessed the Spanish property market. According to forecasts published by these institutions, due to the pandemic, property prices in Spain could fall by an average of 6% and land prices by up to 20%. Specialists forecast that the biggest price drops can be expected in the case of properties located far from the coastline or the centre, i.e. usually in less attractive locations. It is very probable that well located houses and apartments (e.g. in city centres) will maintain higher prices due to the high interest expressed by investors. According to Bankinter, the general number of transactions may fall even by 35%. Banks forecast that renewal of investment activity on the Spanish housing market may happen in 2021-2022.

 

It is also worth mentioning the positive aspect of the ongoing situation. According to Bankinter, one of the consequences of the pandemic may be that properties will become more affordable and better suited to our earnings. As an effect, property markets that used to abound in very expensive properties, may become more  accessible for investors. It is especially crucial during the current situation.  Many people lost their jobs or had their salaries reduced due to the crisis. Therefore, their financial possibilities dropped.

 

What conclusions may be drawn from the above forecasts? In the short term, the interest in buying a house or an apartment in Spain will certainly decrease and the market will need time to recover from the crisis. Just like construction firms, developers, or buyers may experience financial problems. However, many specialists emphasise that in the long term, after the crisis ends, properties will still be the best forms of investments.

 

It is also worth remembering that despite the initial decline, prices can very quickly return to their previous state. The most crucial aspect in property investment is to buy it at an attractive price for a given market situation. You can already buy a house/apartment on very favourable terms - sometimes negotiating an even better price. In addition, the sooner we start the process of buying property and deal with the necessary formalities and repair issues, the sooner we will be able to make the steps related to rental or start using it on our own. Some specialists emphasise that the future decrease in property prices is not what we should focus on when planning investments. You should be aware that in some cases you are able to negotiate a much better price with the owner in comparison to the initial offer - a real estate agent with market expertise and the right skills can be a great help in this situation. Check out interesting offers on tripinvest - Property in Spain - and contact our agent.

 

advantages of investing on the Spanish property market during COVID-19

 

All this can make Spanish properties even more interesting in the eyes of investors. As many people point out, the pandemic will finally end and the property market will open up even more attractive investment opportunities for us. It is worth noting that Spain still remains a tourist power due to its climate, culture, traditions and gastronomy. It is the 3rd most visited country in the world in terms of tourism, which can indirectly guarantee that investments in the Spanish property sector will remain safe and profitable even after the pandemic.

 

Is property investment in Spain safe nowadays?

Should you give up investing in Spain in view of the current situation? Well, not necessarily. If buying property in Spain is a dream of yours, you don't have to abandon it completely even in the current situation. Although the consequences of the pandemic are and will continue to have impact for some time, the Spanish property market offers attractive, safe solutions for future investors.

 

Of course, the purchase of property may now be difficult and take more time (for instance some developers have temporarily suspended the planned projects). For this reason, many investors decided to postpone the purchase. This may be a very good solution due to the high probability of lower property prices.

 

Property and other types of investments

First of all, let's focus on why property may be the safest form of investment in the era of the COVID-19 pandemic. To begin with, we would like to emphasise that almost every form of investment is more or less connected with risk. However, properties are certainly among the more stable ones, especially in the long term. Below we present a brief comparison of various types of investments, including the property sector:

  • property investment - maximum safety

The coronavirus pandemic has impacted many sectors of the economy. For the property market, such a crisis may mean a drop in the value of houses, apartments and flats. This, in turn, allows investors to buy a property at a lower price. In the long term this can be a very cost-effective solution. Once the situation on the property market stabilises, the purchased premises can be resold - probably with a large profit. There are many indications that once the crisis is alleviated, there will be an increased interest in houses for sale as well as short-term rentals. The current situation on the property market is also crucial - the competition is very low, as many investors have decided to postpone the purchase due to the pandemic.

 

Of course, how much we actually gain from buying a property depends to a large extent on the location in which we have invested. Choosing a place that attracts investors, landlords or holidaymakers - depending on our investment goal, is the ultimate key to success. By choosing an attractive location (and Spain is certainly one of them), we increase our chances for a higher return on investment.

  • investment on the stock exchange, investment funds - high risk

Investment on the stock exchange or in investment funds will not be as stable as in the case of property. It is very variable. Although share prices may now be relatively low, you have to be aware that the current situation on the stock exchange is not stable. Therefore, there can be no assurance that when we decide to withdraw our money, we won't run into a slump again - another crisis that could cause us to lose the money invested. 

  • gold investment

Gold is one of the most recommended forms of investment in times of crisis to people who are looking for a long-term capital investment. However, it should be noted that for many people it may turn out to be a bit more complicated. Investment gold comes in the physical form and investment contracts. In the latter case, we do not really physically own gold and if at some point we want to receive it, the exchange may not be possible due to its limited availability on the exchange. In addition, if you decide to purchase gold in the physical form, you will need to store it properly, and thus also secure it in case of theft. This may mean additional costs for the investor, e.g. related to purchasing a safe or renting a private box.

 

How to invest in Spanish property during the pandemic?

Let's now briefly explain how to start investing in the Spanish property market in accordance with the current restrictions. It is obvious that the current situation makes it impossible to carry out the standard process of buying and selling a house or apartment abroad. We cannot go on an investment trip, and all the formalities related to obtaining financing may be difficult - e.g. access to notaries. How to safely invest in property during the pandemic? Here are some useful tips.

 

In response to the introduced restrictions, real estate agencies enable clients to carry out the investment process (or at least part of it) in a different way than before. It is worth noting that some of the activities related to investing in Spain can be easily carried out over the Internet. Unfortunately, we can not carry out the entire purchase remotely, but we can take the first step that will bring us closer to our dream investment.

 

Investing in Spanish property during COVID19 from home

 

It is also worth mentioning that some agencies allow making a reservation of a selected property. Of course, it is impossible to make a decision to buy a particular place without seeing it or its surroundings live beforehand. At the moment, we can't go on a trip and carry out such reconnaissance on our own. However, we can ask for help from professionals and use the services of a company that will visit the property we are interested in and reliably check specific aspects of the offer or even present it to us during a video conversation. Of course this will not be as convenient as a visit in-person, but it will give the investor a certain view of the situation and help them to decide whether it is worthwhile to stay with this particular property or to look for a more attractive offer.

 

In the current situation, provisions related to securing investors in case of purchase resignation are a huge convenience for them. When concluding a sales contract, in the event of problems related to a pandemic (e.g. flight cancellations), they may guarantee the return of the advance payment. Usually, in case of resignation, the advanced payment is not returned.

 

It should be stressed that the current situation has a huge impact on the actions of both investors and people selling properties. As a result, we can more often come across offers of houses/apartments at lower prices, compared to those from before the epidemic. Importantly, this applies to both secondary and primary market properties - including the offers from developers. However, investing should never (also, and perhaps most importantly during a pandemic) take place under the spur of a moment, or the influence of emotion. Although the price of the property may seem like a great deal, we should take time to check the credibility of the offer.

 

Nevertheless, we would like to point out that an property investment should not be conducted hastily, without a reliable analysis of its current financial capabilities. In the course of a pandemic, you need to be particularly wise in disposing of your savings. If you are sure of your current financial situation and have a stable job, it is obviously worth considering this form of investment. Otherwise, we recommend you to be patient and most importantly take care of yourself and your loved ones - it will also be possible to purchase property in more secure times.

 

 

 

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