Real Estate Market Shines As Foreign Buyers Drive Prices To All-Time High

In the wake of the pandemic, foreign buyers have returned to the Spanish housing market, with home purchases breaking records in 2022 and a strong demand for luxury housing. The British, Germans, and French remain the leading foreign buyers, but other nationalities have also gained prominence.

Foreign buyers have made a strong return to the Spanish housing market in the aftermath of the pandemic. In 2022, home purchases broke records, and the average price per square metre of real estate reached an all-time high. Foreign demand has grown faster than domestic demand in the luxury market segment.

The British, Germans, and French have remained the leading foreign buyers, although other nationalities have gained prominence as well. For example, the Dutch, Norwegians, Irish, and Ukrainians have all increased their presence in the market, albeit for different reasons. Additionally, demand from the United States and Latin America has gained momentum, driven by the strength of the dollar against the euro.

One important development that has occurred in recent months is the implementation of a tax on large fortunes. This new, temporary tax is to be paid by taxpayers with assets over 3 million euros and will also affect non-resident foreigners, which could have consequences on the real estate market.

This year has been historic in terms of home purchases by foreigners. During the first half of the year, notaries estimated 72,987 housing transactions in Spain led by foreign buyers, the highest figure in the historical series that began in 2007. Furthermore, these operations represented 20.3% of the total registered in the country as a whole, equaling the record set in the second half of 2015. Additionally, the average price that foreigners have paid for properties has marked new highs.

This trend continued in the third quarter of the year. According to the College of Registrars (Colegio de Registradores), between June and September, foreigners purchased 26,728 homes in Spain, representing 15.92% of the total number of registered sales and a new record in the historical series of this body, both in volume and weight over the total operations. These figures show a clear and consolidated upward trend and are largely driven by the strength of the home transfer market.

Foreign buyers are increasingly interested in the luxury segment of the market. This is corroborated by a study by the specialised real estate agency Lucas Fox, which states that the growth of foreign demand for luxury housing was faster than that of domestic demand in the first half of the year, reaching a record market share of 14.7% at the end of the first semester. The company affirms that demand has been diversifying throughout 2022 and insists that “in an international context of growing uncertainty, foreign buyers have shown their confidence in Spanish real estate as a lifestyle option and a solid investment.”

Foreign buyers have paid the highest price in history to buy homes in Spain in 2022. This is shown by data from the General Council of Notaries, which put the average price paid by foreign buyers for each square metre of houses at 2,062 euros during the first semester of the year. This amount not only shows an increase of 10.6% year-on-year but also breaks the record for the series collected by notaries since 2007, during the real estate bubble.

The new maximum price has been driven mainly by the average price paid by non-resident foreigners for their homes (€2,522/m2, also a record, growing by 2.9% year-on-year), which far exceeds that paid by residents (€1,622/m2, increasing by 8.2% compared to the first half of 2021) and nationals (€1,560/m2, with an increase of 5.2% year-on-year).

Prices grew in year-on-year terms across the whole of Spain, with the region of Extremadura at the top of the list, with a rise of 34.3%, followed by Asturias (27.5%), Murcia (19%), Madrid (16.6%), Aragon (16.1%), Valencian Community (13.6%), Canary Islands (13.1%), Cantabria (11%), and Catalonia (10.4%). The foreigners who paid the highest amounts per square metre were those from Denmark (€2,870/m2), United States (€2,837/m2), Norway (€2,701/m2), Sweden (€2,701/m2), Germany (€2,657/m2) and Switzerland (€2,567/m2). Buyers from the Netherlands, France, Belgium, Italy, and Ireland also exceeded the average price paid by foreigners as a whole.

The most prominent nationalities of 2022 in terms of volume of operations are British, German, and French, although buyers from the Netherlands, Norway, Ireland, Ukraine, the United States, and Latin America have gained prominence this year. According to data from notaries, Dutch, Norwegian, and Irish foreigners led the increase in home sales in Spain, with increases of more than 100% in all three cases, meaning they formalised more than double the number of transactions than in the same period of the previous year.

Experts attribute this rise to factors such as the promotion of teleworking, the good climate, good communications, the technological ‘hubs’ that are consolidating in Spain, housing prices that are comparatively lower than in other European countries, and the energy crisis. Additionally, buyers and investors from the United States and Latin America have also gained prominence in the market, who have taken advantage of the weakness of the Euro, which in 2022 has lost parity with the dollar, to buy properties ‘at a discount’.

On the other hand, British buyers are losing ground in the market. In the third quarter, 9.3% of buyers came from the United Kingdom, the lowest figure since registrars collect data, and a far cry from the almost 24% they represented in sales to foreigners in 2015.

According to experts, foreign buyers prefer large houses with a terrace and pool, primarily in coastal areas, to be used as a second residence in the majority of cases. Interest is also growing in taking advantage of longer seasons or stays, as well as teleworking, in addition to the traditional factors such as good weather, air connectivity, or a lower cost of living than in their home countries.

By location, the Costa Blanca (Alicante), the Costa del Sol (Málaga), the Balearic Islands, and the Canary Islands continue to be the areas where foreigners have a greater weight in the housing market. However, depending on nationality, there are variations in the preferred locations.

© Real Estate Market Shines As Foreign Buyers Drive Prices To All-Time High – Valencian.es
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