Foreign investment in Spanish residential property increased by 17% last year to its highest level since 2004, according to the latest figures from the Bank of Spain.
According to real estate experts it is a clear sign of improving confidence in the Spanish property market and is set to give the industry a boost at a time when fewer Spaniards are buying.
The figures show that foreign buyers spent €5.54 billion on Spanish property in 2012, up from €4.7 billion in 2011, and a 52% increase on the €3.6 million of 2009.
A break down of the figures show that property is becoming increasingly popular as overseas buyers bought €1.8 million worth of property in the last quarter of the year, a 56% in on the same period in 2011 and up 92% in the final quarter of 2010.
But Spanish property expert Mark Stucklin of Spanish Property Insight pointed out that the figures are still some way off the high of €7 billion spent by foreign investors in 2003. ‘Foreign demand has been growing in response to lower Spanish property prices and political unrest in competitor destinations in North Africa, making Spain look like a safe bet,’ he said.
However, whilst foreign investment in Spanish property is growing, the opposite is true of Spanish investment in foreign property. Spanish investment in foreign real estate fell for the fifth consecutive year in 2012, to €596 million. the lowest level in 10 years and 82% lower than the peak in 2007, when Spaniards spent €3.3 billion on foreign property.
Prices are still falling in Spain and although this is enticing foreign buyers, it is not enticing Spaniards. According to Stucklin falling house prices are one reason why so many Spaniards say they have no plans to buy a home this year. Expectations of lower house prices are making Spaniards wait and see,’ he said.
Just 3% of the adult population in Spain plan to buy a home this year, according to the latest consumer confidence survey by the CIS. ‘Economic worries are the other big reason. With unemployment above 25% and many of the rest wondering how long they will keep their jobs, Spaniards are understandably cautious about buying property,’ added Stucklin.
The official Spanish House Price Index from the Department of Housing fell by 10% in 2012, the first time since records began that Spanish property prices have fallen by double digits in nominal terms, according to the Department of Housing.
In real terms, after adjusting for inflation, Spanish house prices fell 12.9% last year and have fallen by double digits for the last three quarters. Average national Spanish house prices are now 27% the peak in nominal terms, and almost exactly the same as they were in real terms 10 years ago, when the property boom was just getting going.
‘So even by the Government’s notoriously optimistic figures, it looks like Spanish property prices have been purged of their boom time excesses,’ explained Stucklin.
House prices fell by 10% more last year in most of the regions popular with foreign holiday home buyers. They fell 13% year on year in Alicante and are now 31.8% down from peak to present, fell 10.6% in Andalucia where they have fallen 28.6% from peak to present and fell 8.9% in Malaga where the peak to present fall is 34%.
On a quarterly basis prices are down 6.3% in Alicante, down 2.6% in Andalucia and down 1.7% in Malaga. But on a longer term basis prices are well up on where they were 10 years ago in many parts of the country. In Andalucia they are 38% higher than a decade ago, some 6.7% up in real terms. In Malaga prices are 31% up but in real terms this is just 0.2%. In Alicante they have not done as well, up just 9% on a decade ago and down 13.8% in real terms.
