Introduction – Property Market Spain

The stimulation for investigating and writing this report was an email from a client, which contained the following –

“We have decided to postpone valuations for 6-9 months due to the Covid-19 pandemic situation, where no one really can predict which way the values will go. We will, however, rely on you to keep us abreast with updated market information once you, with some certainty and confidence, can detect which way the property market in Spain and in particular along the Costa del Sol is moving. Hence the span between 6-9 months. If you can detect a certain movement sooner than 6 months from now, then we would appreciate receiving your indication about this.”

Action

The survey took the form of contacting lawyers, notaries and estate agents, all of whom are in the ‘front line’ of actual sales and asking the following questions.

  1. How many sales has your office notarised in March, April and May?
  2. How many are lined up for June?
  3. How many are lined up for July onwards (after Spanish borders open)?
  4. Of those sales, how many were/are
    1. Resale properties?
      1. When were the private sale contracts signed?
    2. Off-Plan where Licence of First Occupation has been granted?
      1. When were the private sale contracts signed?
    3. How many have been cancelled/prices renegotiated?

Summary of Responses

  1. The majority of offices had deals continuing during the 3 lockdown months, some being notarised and others with private contracts completed and deposits paid, merely awaiting the notary business opening again.
  2. Now that the Notaries offices are open, signings are proceeding, with buyers and sellers present or lawyers with Power of Attorney.
    • Agents and lawyers are noting an increase in enquiries, with potential purchasers even prepared to reserve properties unseen, after surfing on the internet and deciding ‘that’s the one’ during the previous 3 months.Map of Spain with a property and keys
    • Local buyers have had ‘privileged’ access for viewings, due to travel being permitted within Provinces. As from 8th June, travel and viewing is extended to all the Phase 3 areas, which include the Regions of Andalucia, Murcia, The Balearic and Canary Islands and other areas to the N of Spain. Travel is still restricted in provinces in Valencia Region, but that is expected to be opened to Phase 3 on 15th Madrid and Barcelona are also restricted and may not be ‘released’ until the end of the State of Alarm on 21st June (Midsummer)
    • Survey Spain are noticing an increase in enquiries for pre-acquisition building surveys, a sure sign that people are committing to buying. Some clients are using the survey as their inspection as they have not been able to visit the property themselves.
  3. All professionals are reporting interest from potential buyers to travel to see the properties as soon as the borders open, which should be 1st
    • Airlines, hotels and tourist authorities are offering special deals to encourage tourism to start again as soon as possible.
    • The level of searches for Spanish themes has increased hugely on the internet.
  4. The majority of sales are for resale properties and on deals agreed prior to the lockdown.
  5. All professionals noted a few cancellations of interest and some attempts at renegotiation.
    • However, the majority have either been concluded or the client has confirmed that they want to proceed to conclusion.
    • There have been very few withdrawals with buyers losing their deposits.
    • Survey Spain noted a few withdrawals of instruction to inspect properties at the beginning of the lockdown, but all who had prepaid indicated that we should keep the fee as they would want a survey in the future.

Detailed Responses

The responses below are from very few of the hundreds of Lawyers and Estate Agents firms active on all the Costas of Spain. However, they can be seen to be uniformly positive. Note that no negative replies were received, and the entries have not been ‘doctored’ to present a rosy picture. They are what we received.

  1. Estate Agent – “Just back from the Notary Office in Fuengirola. The Notary is already back to processing 50% volume of property deals as compared to before the pandemic! So, market recovers and there is both local and foreign interest! The Notary himself firmly believes that Costa del Sol has its own economic micro-climate and will recover quickly.”
  2. Lawyer – “March 1, April and May 0. In Pipeline 1. After June 2, both resales. No Off-Plan.”
  3. Lawyer –
    • “8 sales notarised in March, April and May.
    • One lined up for June.
    • July onwards is difficult as the deals that are there don’t have a time span.
    • Of the 8, 5 were resale properties with private contracts signed 6 to 12 weeks before.
      • The Off-plan contracts were signed between 12 and 24 months ago.
    • We had 2 cancellations and 2 renegotiations, which are still ongoing.”
  1. Lawyer – “I think that the comment “there is no market” is pretty wrong.”
    • “The market may not be there just now because of flight restrictions, but even with this considered, I can advise as follows:
      • March, April and May? – Around 25.
      • Lined up for June? – “One for 9M(!), one for 2M, three for circa 500k and a potential one, whenever they can fly to Ibiza, of 2M. One off-Plan.”
      • Lined up for July onwards? – “We have 3 instructions in the last 10 days, all smaller deals, that will possibly close towards the end of July.”
      • Resales – When were the private sale contracts signed? – “Mostly between February and March.”
      • Cancelled/prices renegotiated? – “We’ve had 1 price negotiation and 3 cancellations.”
  1. Lawyer – “In general we were able to sign some deeds in the last months and we have some Notary signings lined up for June, but the most of them come from the past before the lockdown began. However, I am positive that things are moving again.”
  2. Lawyer – “We have completed until now very few of the sales-purchase that were signed during the first part of the year, before the covid-19. Most of the deals where the contract was signed before the covid-19, have been postponed for the months of June to September.
    • As explained, all these transactions were signed before the covid-19 and most of them are resale.
    • The new construction, as per our experience, are waiting for the Occupancy Licenses.
    • We have had cases cancelled with negotiation for the reimbursement of the amount paid, and the majority have been postponed and renegotiated prices and timing for completion.
    • As per the information we have from the area estate agents the market is quite stable but slow.”
  1. Estate Agent – “We have had 8 sales closed in March, April and May, signed at notary, three of them in the last week.
    • Three more for June, five between July and September.
    • Three with contracts signed before March 15. One new, rest resales.”
  1. Estate Agent – “I would just like to make the point that where prices have come down, it is because they were too expensive before the pandemic and not as a result of it!
    • At this stage, the levels of enquiries are encouraging and we have no reasons to expect that there will be any substantial change in real selling prices of properties in good locations, although it is a good time to have a look at unrealistic asking prices.
    • I think that during the last 3 months we have all had more time to speak to Vendors and as a result of that there have probably been more re-alignments of prices than we would normally have seen.View of sea overlooking property in Mallorca.
    • Until we have open borders, (Both National and International) the market here is effectively on ice although the levels we are seeing seem to be increasing daily and certainly show a level of “pent up demand”.
    • Added is the fact the lockdown has allowed many people to review their lifestyles and to consider making lifestyle changes. This may be that they, like me, have realised that you can get more work done from home or it may be that they live in cities where the lockdown has been far more difficult to tolerate and that the time has come to make the move. I know people who fall into all these categories, both from within Spain and further afield.
    • My UK business has just completed its second week “Back at work” and has been far busier than it was back in February. Again, we think this is due to pent up demand, but also at the same time are seeing many people who have decided to make lifestyle changes. Interestingly, quite a number wanting to migrate from apartments to property with outside space.
    • My best guess at the moment is that the premium locations will be little changed although property in secondary and tertiary locations that have been riding on the coattails of the premium asking prices will have to come back into line with some realism.
  1. Architect – “Situation is coming better, at least in this area. (Almería). Things are moving slow, but moving.”
  2. Lawyer – “Sales lined up for June – 2
    • July onwards – There are clients interested, but we have not an exact number.
    • Off Plan property – When were the private sale contracts signed? – In 2018.
    • Cancelled/prices renegotiated? – 0
  1. Project Manager –
    • “A national estate agency I deal with has had 14 sales locally during the lockdown period, ranging from 2.8M€ euro to 9M€ euro. The 9M€ euro villa was a new build, finished only 3 days before the sale.
    • Another agency/project manager specialising in new builds, say that all their clients are pushing ahead with their projects
    • A small development of 5 villas in San Pedro de Alcántara (Marbella) has sold 3 in the last two weeks. The developer is continuing with other projects.”
  1. Estate Agent – “Our Spanish sales people are the ones doing the deals, with 3 sales last week alone. We are going to concentrate on marketing to the local Spanish and Resident Expats, as many of these are wanting to improve their situation before the borders are opened and the expat buyers come again.”
  2. Estate Agent – Covid-19 Market Report
    • About 35% of the owners with whom we’ve been in touch in the last couple of months have adjusted their asking prices. The average reduction of asking prices we have witnessed has been close to 11%. Based on the positive factors analysed later, and the various publications and surveys by other professionals, we are estimating a real sales price decrease this year somewhere in the region of 5% to 10%. In some high demand areas, less. There is even speculation that properties especially in demand might even see increases in price. In less desirable areas, perhaps more % drop.
    • Many of the better developers have stated that they have no intention of heavily discounting their prices, but will certainly offer some leeway in price, and possibly negotiate with respect to extras and payment terms. New projects which might be suitable for first residences, either for the local and national markets or the foreign market when it is able to return, will perform substantially better in sales than those which are comprised of properties destined for holiday use
    • With less foreign clients travelling, demand will be weaker and sales will be slower. The Local and Spanish markets will be the most active in the coming months. The certain return of national Spanish tourism to our area this summer, in large, maybe even record numbers, is likely to mean that there will be a significant increased interest in purchasing homes here by those Spanish buyers less affected economically by the crisis.
    • In the last 30, days enquiries from potential buyers were down only 2% from the same period last year. This is very encouraging news, drastically different to what we experienced in 2008, where buyer enquiries virtually disappeared for months on end. Many of our colleagues are reporting the same results.
    • There will be more buyers wanting gardens (to feel the grass under their feet!) with pools and properties with large terraces, after so many weeks of being confined to the walls of their homes. Life in the Costas has always been about inside/outside living, and there will be those who decide that their present homes are unsatisfactory, and now is the time to change. The question arises – where would you like to live if there is another lockdown?
    • We have no doubt that many will make major lifestyle changes quickly and decide to buy a second residence or semi-permanent home. Other potential buyers who have considered the possibility of buying a home here for years, and after having suffered this lockdown, will now have the motivation to proceed with their plans. This demand will be especially evident in the best residential locations and for exceptional properties.
  1. Survey Spain – Yesterday we had a building survey cancelled because our client had ‘lost’ the property. He had agreed a price, but not left a deposit and another party inspected at the weekend and left a deposit and so has priority. It shows that there is competition for the right property.
  2. News reports
    • 80% of Hotels on Costa del Sol are to open in July.
    • Spain has the most hotel reservations worldwide on the travel website ‘Travelgate’, and 1/3 of those are for Andalucía
    • Tourists will be able to visit Spain from 1st July
    • Benidorm-based hotel chain Magic Costa Blanca has reported that 85 per cent of summer bookings made by Brits, Belgians, Dutch and other foreign customers before the coronavirus State of Alarm, have not been cancelled.

Statistics

  1. Since the 4th May, Survey Spain have been keeping a record of all the resale properties being offered on the market at Discounted or Reduced prices.
  • Undoubtedly, there will be many more available, but time limited us to almost 100 entries located on the Western Costa del Sol.
  • The average of all the entries shows a discount of -12.70%, with significant variation from -3% to -36%. The reduction in prices will be for many reasons and not just drop due to the Covid-19 limitation of demand, with some using that excuse to ‘save face’ in dropping the price that was too high anyway.
  • Municipal Location – there is not a great difference, with the findings, where there were sufficient properties to be meaningful, being –
    • Alhaurín and Coín –                                Average – 14%                         Highest – 34%
    • Benalmadena and Torremolinos –                       – 11%                                        – 25%
    • Fuengirola –                                                              – 15%                                        – 29%
    • Mijas –                                                                        – 12%                                       – 36%
    • Marbella –                                                                  – 12%                                       – 36%
    • Benahavís –                                                               – 14%                                       – 29%
    • Estepona –                                                                 – 12%                                       – 33%
  • Property Type – showed a little more variation.
    • Apartment                                                     Average -10%                         Highest – 25%
    • Penthouse                                                                      -15%                                         – 36%
    • Townhouse                                                                    – 16%                                      – 34%
    • Villa                                                                                 – 14%                                      – 36%
  • Unfortunately, there was not enough evidence coming forward for areas further West such as Manilva and Sotogrande. However, it could be that these areas have already had price reductions due to their disproportionate reliance on Gibraltar linked occupiers, which has already been hit by reductions linked to Brexit and Spanish tax fears.
  • We must also recognise the increasing level of incentives being offered by New Build Developers, to buyers and especially estate agents. The furniture and other packages and increased levels of commission are the equivalent of the seller accepting an effective reduction in price.
  1. We also studied the entries in the Multi-Listing website, Resales Online.
  • As of 7th June, the total number of properties stated to be on their system, for Western Costa del Sol, was 24,230.
  • The system records original price and any drop in price since that date. By restricting entries to prices over 100,000€ euro, it was found that 3,998 had a discount of -10% or more, which is 16.5%, so not an indication of a market crash.
  • San Roque, Los Barrios and La Linea, including Sotogrande, showed 18%, and Manilva 14%

Conclusions

As a result of this study and the information gathered, Survey Spain can show that there IS and has been an active market in the Expat areas of Spain. As one of the contributors has stated, ‘the Costas have an economic micro-climate’, due to their attraction to buyers from all over Europe, and indeed the rest of the world. Whilst the Spanish economy undoubtedly does have an influence, through the Spanish investors, developers and individual buyers, it is also in the form of the employment sector serving the international clientele.

The Spanish international borders are due to open on 1st July, and it has been reported that there is increased website search and AirBnB activity, confirming evidence from letting agents that visitors to Spain will be arriving increasingly from then on. So, we are positive that things will get back to the ‘new normal’ relatively quickly.

Brexit is likely to have a short-term benefit as UK buyers want to conclude deals as soon as possible before the advantages of the transitory period of this year are lost, currently at the end of 2020. This should lift the market this year. In addition, again as stated by a number of responders, lifestyle changers, perhaps disillusioned by their ‘home society, and ‘digital nomads’ who’ve discovered that they work just as effectively from anywhere, will be arriving in increasing numbers, further adding to the dynamism of the area and lessening the retirement home status it has had in the past.

The world economy is shrinking and perhaps changing its character as locked down populations have discovered that there is more to life than spending money. Whilst many will see less income and reduced financial status, others will have learned and gained from the experience, and it is those who are likely to be looking to better their lives by lifestyle change.

In March, RICS obliged us to note in our reports that there was ‘Material Market Uncertainty’ due to lack of market evidence. ECO/Bank of Spain valuers were advised to consider whether they should be providing valuations at all.

The RICS’s decision was based on markets where registered sales information is publicly available. Those markets will have stopped for a period until the deals restart and are recorded. However, in Spain, we have the ‘benefit’ of valuing from Asking Prices and not depending upon historic data. Survey Spain have always carried out a new valuation every time on properties, and do not merely ‘index link’ based on previous valuations. We are seeing the market reacting daily to the new situation, and Survey Spain’s current market valuations reflect this.

Our final opinion is that there is an expanding, active property market in the expat areas of Spain, but with prices having dropped on average by 10% to 15%. As always, the averages include a very wide range, depending upon property type, exact location and orientation. Local expertise is essential and is provided by the many reliable and knowledgeable property professionals who have been working here for many years.

Appreciation

Survey Spain wishes to thank all those who have contributed to this report, who include, in alphabetic order

Costa Luz Lawyers                 Daniel Gonzalez Aranda                    DeCotta Law  

Lawbird Legal Services          MADE                                                   Malaga Expat Consulting

Merz Law Firm                        My Lawyer in Spain                            Oscar Eguren Abogados

Panorama Properties             Solis Abogados                                    Star La Cala