Where is the Spanish property market headed in 2019?
Markets are all about cycles, and it seems that the current growth cycle, which started as a recovery from the financial crisis back in 2012-2013, is now reaching maturity. Given this, what can be expect for this year and the near future?
The property market in Spain recovered more quickly in foreign-market locations such as the Costa del Sol, Mallorca and Ibiza, but now seems to be levelling off here. Problem factors are prices that are perhaps rising too swiftly, supply – which has caught up with and is beginning to surpass demand – and a possible tapering off of demand, which is not unusual and again cyclical.
On the Costa del Sol, enquiries began to drop in the second half of 2018 and generally speaking this has continued in the first half of this year, confirming that this was the year of consolidation, in which growth levelled off and supply began to catch up with demand. For the Spanish property market in general, this is the best year in over a decade, but for areas like Marbella, which are further in the cycle, there is a sense that perhaps last year was the peak one.
Nationally and locally, construction is once again a prime driver in the economy – growing 10% in relation to the previous year and leading to almost 600,000 sales – but experts are warning that the best thing would be a drop in new projects that would bring supply and demand in line. This would maintain sturdy price levels for now, but it is expected that they too will begin to ease off before long.
Boom or bust for the Spanish Property Market?
If there is a market and price correction to come, it is likely to be a moderate one, as the growth cycle has not seen a ‘mad boom’ but a moderate up-cycle with steady growth in sales and property values. The initial explosion of demand for modern properties has been largely satisfied, and this will cause a drop in the rapid increase in modern house prices, and a relative shift of power back to existing resale properties. The market’s appetite for sleek white villas and apartments appears to be slowly cooling, but homebuyers continue to look for innovation in the service of style, comfort, economy and also sustainability.
The latter will be one of the buzzwords of the coming years, also in construction, but for now everything points at more moderate levels of activity. According to figures compiled by an online portal, Spanish property prices grew by 7,8% last year in 2018, which beats even the 2006 level of 7,7%. For this year, the increase is expected to be between 4%-6%, and the total number of properties sold will also increase by around 4%-5%. The market for land remains a little overheated, especially in locations such as the Costa del Sol, but that should begin to alleviate a little as investors and property developers react and reduce production, and with it a lower appetite for land.
On the whole, therefore, we can expect a levelling off of growth and an easing of some of the activity that has been driving house prices up quite steadily in the past few years. It will be interesting to see if the market can maintain such moderated but still highly acceptable levels of activity for the foreseeable future.
Adam Neale | August, 2019