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The Impact Of Covid 19 On The Spanish Property Market

The Impact Of Covid 19 On The Spanish Property Market

Spanish property sales to foreign buyers fell by 50% during the second quarter of 2020 – according to the latest data released by SEDE, the Association of Spanish Registrars.

The SEDE stats reveals the initial impact of the global pandemic on the Spanish property market after the country went into lockdown in mid-March, which unsurprisingly had a profound impact on both domestic and international demand.

Overall, total sales across Spain during the period April to June 2020 fell by 41% to 76,545 transactions, versus the same period in 2019. Whilst transactions involving foreign buyers dropped by 49.7%, with just 8,160 properties being purchased by non-Spanish residents – a low last reached in the years immediately following the global meltdown of 2008, or La Crisis as it is commonly referred to in Spain.

This national figure outpaces a decline of 39% across the European real estate sector as a whole, according to Gesvalt, one of Spain’s largest property valuation agencies. Possibly reflecting the severity of the lockdown in Spain and the restrictions this placed on buyer mobility.

Despite the travel restrictions imposed by the Spanish government during this period, the UK remained the largest overseas market for Spanish property by volume – accounting for 12.3% of all purchases made by foreign buyers during this period. Followed by Germany (7.2%), France (6.65%), Belgium (5.8%) and Italy (5.5%).

Transaction levels across the UK and all other key foreign markets were down by at least 50% year on year.

What are the prospects for the Spanish property market across the rest of 2020?

Some industry observers have suggested that sales could fall further during Q3 before recovering some ground in Q4. Based on an assumption that some of the transactions recorded during Q2 were physically commenced in Q1 or before – when both overseas and domestic buyers had more freedom to travel than they did during Q2. Which would then in turn have a knock-on effect on Q3 sales.

Either way, mobility certainly remains a key issue moving forwards. As Governments continue to juggle with the dual requirements of generating economic upturns without triggering further Covid 19 outbreaks – which could then lead to further lockdowns and restrictions on mobility.

What sort of impact has the pandemic had on Spanish property prices?

At the time of writing, downward pressure on prices have yet to work through the system. However, some industry observers expect the price of second-hand properties to drop by between 5% and 10% over the next 18 to 20 months – dependent of course on whereabouts in Spain a property is located, as there can be enormous regional differentiation.

There is also every possibility that the impending economic recession in Spain will exert even greater downward pressure on the market.

In reality however, all forecasts remain entirely dependent on unknown factors, such as the duration of the current pandemic and the speed of economic recovery in closely related sectors such as tourism and other key drivers of price and demand in the Spanish property market.