Real Estate Market Analysis in Spain

The Spanish State Investment Program for Golden Visas is One of the Most In-Demand in Europe. It is particularly popular among applicants from Russia, Ukraine, and other former Soviet countries. The program offers a variety of options, but one stands out overwhelmingly: the purchase of real estate. What is happening in this highly sought-after market after the onset of the pandemic? Are there regional differences, and how are they manifested?

The Spanish Market Retains Good Potential.

Current Market Situation

What trends are being observed in the Spanish real estate market in the first quarter of 2020? These were unusual months, marked by the outbreak of the COVID-19 pandemic and the subsequent "global quarantine." During this time, international passenger transport was reduced to a minimum, and business activity was in a state of stagnation.

Now, as quarantine measures are easing, transportation is resuming, and the first analysis of the real situation instills cautious optimism.

The International Market Proved Stronger Than the Domestic One

A global trend in the real estate market during this period was the decline in sales, which was quite expected. Spain was no exception, with its market falling by 16% compared to the same period last year.

However, one piece of news should encourage agents who conduct transactions aimed at foreign buyers rather than the domestic market. While last year in the first quarter, foreigners accounted for 17.04% of housing sales, this year the figure has increased to 17.55%. In other words, the international sales market proved more resilient to the crisis than the domestic one.

What About the Regions? Table of Current Conditions and Its Analysis

Looking at the data presented in this table, it is striking that in Alicante province, almost half of the real estate sales are to the foreign segment. Tenerife is only slightly behind. In several other provinces, foreigners account for about every third transaction.

At the same time, we can observe how property sales have declined in certain provinces (data were not provided for all regions). For example, the Balearic Islands and Las Palmas showed a 16% drop, which is in line with the national average. However, the province of Castellon "did not notice" the crisis at all, with sales levels matching those of last year.

It is evident that even now, when air travel is just beginning to recover, real estate in popular Spanish regions continues to attract foreign investors.

Maintaining Optimism and Preparing for Market Recovery

In conclusion, a few general observations can be made:

• The international segment of real estate sales in Spain has proven more resilient than the domestic market.
• Foreign investors still believe in Spanish real estate and are ready to take active steps in the market as international air travel recovers.
• Real estate agents working with foreign clients, as well as staff at immigration centers, should pay more attention to virtual property viewing programs.

The figures presented inspire some optimism, and market analysts in Spain expect that by the end of the year, sales volumes will reach the level of 2016, and under favorable circumstances, even 2017.

Purchasing Foreclosed Property in Spain

Buying bank-owned or foreclosed property in Spain is a widespread practice. A particularly large number of purchase and sale transactions involving foreclosed property were observed after the 2008 crisis.

Foreclosed (Bank-Owned) Property

What is foreclosed property? A bank that issues a loan secured by real estate has the right to repossess the collateral if the borrower fails to repay the debt. Subsequently, the financial institution, interested in recovering the loan amount, sells the property at a reduced price. The number of such properties increases during a crisis when the purchasing power of the population decreases.

Disadvantages of Buying Bank-Owned Property

A price below market value often becomes the primary deciding factor when choosing bank-owned property, and this is indeed the case. However, discounts greater than 30% should prompt consideration of the property's condition, its liquidity, and other risks, such as squatters (more on this below).

Banks are not obliged to maintain the condition of repossessed property, so it often arrives or becomes dilapidated over time. The cost of repairs may offset the benefit of purchasing at a relatively low price. Discounts of 50-80% may indicate low property liquidity. Banks are eager to offload such properties by lowering prices. Such offers can also be a simple marketing ploy, hiding the starting price of a property listed for auction. Buying property with tenants can become a serious problem for new owners. The concept of "squatters" in Spain emerged after the government introduced regulations to protect the rights of citizens affected by the crisis who cannot afford to pay rent. Since then, evicting those who have illegally occupied a property (especially with children) has become a significant problem for property owners. When the owner is a bank, which, according to the law, does not need the property, the court decision is almost always in favor of the illegal occupants. Therefore, banks often transfer the eviction problem to new owners.

Apart from the obvious risks, it's worth noting the limited choice, lack of guarantees for obtaining the desired property (especially with high liquidity), and the need to renegotiate contracts with utility providers (as the bank cancels all previous contracts), which, in turn, leads to additional expenses.

Advantages of Buying Bank-Owned Property

• The price of bank-owned property is below market value, with discounts of 15-30% being quite realistic.
• No outstanding utility payments.
• Transaction costs are reduced by the amount of the property appraisal, which has usually already been done by the bank.

Conclusion

Buying property abroad is a complex and risky endeavor if you do not have support from professionals. The team of experts at the GARANT.in Immigration Center can help you make the right choice and minimize potential risks. In the case of bank-owned property in Spain, it is essential to thoroughly study all the nuances so that what seems like a good deal at first glance does not turn into a disappointment.