The Property Investment Market in Spain

Past, Present & Future

The Spanish property market expanded at an incredible pace in line with the introduction of mass tourism. During the 80s and 90s many second home buyers from north European countries began to purchase homes for summer holidays and a relaxed pace of lifestyle. Many coastal areas started to develop from sleepy fishing villages into holiday resorts. Ex-pat communities began to develop with retired couples attracted to the low cost of living, excellent medical facilities and winter sunshine.

As the tourism market and the property market grew, the infrastructure expanded with new roads, new unbanisations, improved medical facilities and expansions of ports of entry. The massive appeal of the Spanish property market was increased by the low prices in comparison to other European destinations. A market began to emerge for first home buyers discovering the lower priced property in Spain could assist with stepping onto the property ladder in home countries.

Investors with an eye on the huge demand the market was attracting started to bulk purchase units, flipping the sale prior to completion for maximum profits. The demand for the coastal areas bought excellent capital growth returns, bringing prices up further, creating a seller’s market. As the prices in the main resort areas started to become excessive, the demand for Spanish property continued. Areas along other coastal towns that were previously less accessible began to emerge.

Approximately 10 years after the start of the high demand for Spanish coastal properties, the market reached its peak. In late 2007 the market started its downturn as the Spanish economy entered its decline. A year later the Spanish economy entered into recession with coastal areas being the hardest hit by financial issues. Along with tourism, the real estate market was the basis of coastal resort economy. The mass closure of real estate companies left a great deal for the ex-pat community out of work, suddenly unable to pay for the excessive mortgages on their properties.

Owners with no other source of income were forced to sell their properties at bargain prices, fast creating a turn-around into a buyer’s market. Properties in exclusive areas are being offered at prices that have not been seen for over 5 years, causing a steady demand from buyers in a financial position to weather the current economic storm.

It is predicted that the future of the Spanish property market will recuperate within a year, remaining steady for some time. The market is now well established so the short term buying options will no longer be as lucrative or viable as they previously were, although the mid to long term market will offer great potential to buyers with assistance from the steady rental market demand.

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