PART 1 – WIDER TRENDS, EVIDENCE AND FINDINGS
Recent Reports referred to.
Return of the Market (though it really hadn’t gone away) – Survey Spain
Spanish Property Market Report – July 2020 – part I – Survey Spain
Spanish Property Market Report – July 2020 Part II – MARKET OPINION – Survey Spain
This is our 27th Quarterly Report.
Our last was in July of last year, with the October one having been omitted due to there not being significant change. With Covid progressing and Brexit completed, it’s time for further comment and review. To avoid repetition from previous Reports, we have reduced the size of this one.
“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
John F. Kennedy
As in previous months we add to our own experience by also questioning other professionals.
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Summary
- There has been continued demand, with some contacts reporting strong sales.
- The upper end of the market is the strongest.
- Everything is held back by Covid, but once that’s clear, a significant rise in Demand is expected.
- Developments are continuing, based on that theory.
- Prices are largely stable, though dropping slightly.
- Media reports of substantial discounts are not accurate for the expat market areas.
- It’s too early for there to be a real, knowledgeable Brexit effect.
- There is evidence of a desire for a better work/life balance
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Firstly, some general background.
I’m writing this as the rain pours down, as it had done yesterday and promises to do for the next two or three days, so my attitude could be coloured by that! Yes, we do get a few winter storms here, but the big blessing is that we know when they’re finished there will be weeks of dry weather with warm sunshine to enjoy. Also, they ensure that the rivers run, and the aquafers and reservoirs are topped up, supplying fresh water over next summer. The grass will be greener, the flowers brighter, the fruit fuller and life here even better.
“If they can afford to live in the city, they can afford to leave it” and “Why are you still living where you are if you can’t afford it?”
Alhambra Window
Market Analysis – There have been fewer sales in some areas and therefore less evidence to assist with opinions. However, as stated in the Agents and other Professionals comments given below, the upper level of the market appears to be as strong as it was, and even in the less expensive prices, there has not been a radical drop in values.
Buyers and agents are waiting for vaccinations to become standard and therefore travel permitted; the consequences of Brexit to become clearer; and the extent of the projected economic down-turn comes through, when inevitably the government support has to stop, and countries and individuals have to return to an appropriate economic balance.
Potential buyers have been obliged to restrict their spending due to the lockdowns, closure of many entertainment facilities and reduction in commutes and meetings resulting in less travel. So there appears to be many people with ambitions to move to a better life, and who now have the financial ability to do so.
Attitudes have changed significantly, with “the office” not being the heart of the business anymore, but the emphasis that it’s the people who are the business. And these people can be based anywhere. Social interaction is essential for the stimulation of ideas and the overall management of direction. It’s now become very acceptable to have meetings over the Internet with people becoming IT adept.
As many have pointed out, it can cost the same in a month to commute daily into the office from a pleasant place for the family to live outside of London, adding two, three or even four hours to the working day, as it does to fly from Málaga and stay over for a few days, filled with face-to-face meetings. The former commuter will spend more time with their family, in a more pleasant weather, social and health climate.
Covid will usher in the true ‘Ciudad del Sol’, with a better life/work balance.
Campbell Ferguson.
Covid-19 and variants – As with other countries, life on the Spanish Costas and Islands has been regulated to a great extent by their Covid experience. Complete shutdown, changing to flights permitted, changing to only travelling within the municipality, changing to etc, etc.
The principal problems for most, have been the shutdown of the catering and leisure facilities, partial or otherwise, and the closing of schools, with the latter causing panics regarding child care for working parents, and learning teacher’s special skills for home-education.
Knowing the contagion regulations, and keeping up with them, has been confusing. These leisure restrictions have discouraged possible visitors, even when travel was permitted, and also local residents.
All professionals and agents have noted that there has been a huge increase in internet searches and enquiries. It’s inevitable that people locked down or restricted to colder northern climates, are going to seek some escapism relief by viewing the lands and houses that they can only dream of. However, many become serious in their searches as they realise that they don’t have to live near or within commuting distance of the place of work. This has perhaps been the major lasting change that we will see resulting from Covid. And it’s definitely encouraging for the sunshine coasts of Spain.
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Puerto Banus 1970
Developments/New Build – In the past, we have decried the amount of new building that has been going on, well above the anticipated number of buyers, and certainly of occupiers. However, Covid has changed all that, and will possibly save many developers from empty unsold developments. Many will say, “Yes, we knew that we had the right idea.”
However, having said that, developers whose projects have reached completion now are possibly going to have to hang on for a number of months before there is a significant increase in acquisitions, once we have the ability to be vaccinated and travel safely.
Some buyers are placing trust in the developers and agents, purchasing “sight unseen”, based on marketing videos, ‘live’ walk-throughs, and oblique drone photos. Others, more prudent, are having trusted friends or independent professionals inspect the property and location for them first, and reporting not only on the development itself, but also the area around and its potential for detrimental change in the medium term.
Developments, with plans approved or well underway, with completion later this year or the beginning of next, are the ones that are likely to see the quickest financial return on investment.
The layouts of developments are having to change, with demand for larger floor areas, with plenty of outdoor space and access to public walks and outdoor exercise areas. Fortunately, the beaches of all the areas Survey Spain deal with, provide the best of the latter.
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Resale Property – The experience of agents and other professionals throughout the areas covered is largely similar, and therefore there is not a need for separate comments on the individual municipalities. However, there are some minor differences, and these are commented on in the individual quotations at the end.
There has been continuing demand, with sales proceeding to various nationalities. Higher value properties are tending to move forward quicker, perhaps because the buyers can afford to make their own transport arrangements and are not so sensitive to extra transport and contagion avoidance costs.
Also, there are many business owners and managers who can be locationally flexible and they are considering occupying the property more and using it as their working base. The alternatives are being stuck due to Covid lockdown restrictions, in a few million € euro value apartment in London or Frankfurt, or being locked down in a large villa with open gardens, private facilities and a virus environment completely under their control. The choice is easy.
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The moment that Britain starts to experience life outside the EU, is the moment it learns, “with a shock, how very European it was after all”. – Kristina Sabaliauskaitė, Lithuanian former foreign correspondent in London.
Too early to say whether the Brexit access restrictions/limitations will have a significant effect.
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Brexit: Previously having taken prime position, it’s now moved to the ‘inside pages’, whilst all the details and experiences are worked out. It has still got a long way to run, and the ramifications are changing Europe and Britain, and the lives of their citizens, in radical ways. Many of the details have still to be thrashed out by the bureaucrats, regarding finance, trade and even travellers’ permissions.
Survey Spain personnel have found that many in the UK are ignorant or in denial of the changes that have already and must inevitably occur. There is a gradual shift in some formerly UK-expat areas, away from being UK centric, to becoming more international, though with English/Spanish still being the lingua franca. This is maybe reflecting the movements in the EU as a whole.
UK individuals who are resident here appear to be able to carry on as before, as long as they have taken care of the residence paperwork. Of more concern to sellers and agents, is how new residents will be treated. This is not entirely clear, but it appears that Spain is certainly keen to encourage continuing applications for residency, though the changes to tax and periods of stay are likely to place some interim restrictions upon it, with access to health care being a vital component. However, these changes apply to the whole of the EU and so Spain should not be disadvantaged compared to other European countries.
New Residents will have to start their residencia process in the Spanish Consulate of their home country, and there are two in UK, being in London and Edinburgh. However, will they be able to cope if there is a large wave of new applicants?
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UK Residents’ in Spain passports shouldn’t be stamped on entry to Spain from UK, as that could indicate the 90 day rule when leaving or entering again.
– Citizens Advice Spain
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Survey Spain Summary – Extract from response to a general article regarding the property market.
Survey Spain RICS Registered Valuers have been finding that prices mostly have held up so far, at least in the better quality properties. A recent study of a villa in Marbella, found that the 2018 value had risen gradually until the beginning of 2020, but then dropped back to the 2018 level in the next 3-4 months. However, now it’s starting to rise again. There has certainly not been a huge collapse in values.
There has been increasing demand for building surveys from UK clients, indicating that more people are buying, probably to acquire before Brexit changes everything. Lifestyle change has been a significant factor for many nationalities, with many finding they prefer to change to their holiday home location for lockdown, instead of the big city. Also, that it makes sense in the long term as they can work just as effectively from home as they can from an office, with commuter time and stress being avoided. Families are registering their children in schools in the holiday home area, making the change even more permanent.
Next year is going to see the economic effects of the restrictions really hit, with countries unable to keep bailing out companies and individuals indefinitely. The Brexit effect on exchange rates, taxes, travel, and bureaucratic inconveniences, will also make UK residents think twice, so it’s likely to be the hardest year.
However, overall, it’s looking good long-term for the Costas, remembering that no matter how it happens, the Covid-19 restrictions should be a 2 or 3 year problem, with the world having to learn to live with it in the ‘new normal’.
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STATISTICS
We have carried out fewer valuations this quarter, and as we did not report in October, we provide the statistics based on the last 6 months of 2020.
As usual, we have kept a record of the average difference between Asking Price and Actual Selling price, where we have been supplied with that information from reliable sources.
Average Difference Between Asking Price and Actual Selling Price.
Quarters of 2019
January to March – 7.61%
April to June – 10.69%
July to September – 9.7%
October to December – 11.29% – These figures are the average of a range from 0 to 16%
Quarters of 2020
January to March – 8.66% – This figure is the average of a range from -2.53% to -13.69%
April to June – 12.93% – These were biased towards the end of the period and ranged from -9.13 to -16.53%
July to December – 8.94% – Ranging from 1.87% for an apartment in Casares, to 18.92% for a flooded finca that had been empty for a year.
This indicates that there is no substantial drop in prices, with 8.94% being well within normal range.
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Changes in Multi-Listing Site – Resales Online
We found on 13th January 2021 that there were 24,150 properties of 100,000€ euro or more, which is only a 1.3% increase from July. So small as to be insignificant. There was no real change in those having a discount of -10% or more, from 17.22% to 17.6%. Still much more than those increasing price, which was 5.8%., indicating that the market generally is in a downward direction, but not much different over the last 6 months.
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