2020 turned out to be a hard year for the Spanish economy and Spanish business. Yet, despite all the forecasts, the property market saw no significant changes. In the article “Property in Spain after the pandemic: what lies ahead for the market?”, published exactly a year ago, we gave our forecasts for the near future and were proved right: the fall in property prices was very moderate indeed, and demand for homes on the coast held up both among Spaniards themselves and among foreign buyers.
Property prices during the pandemic
According to statistics, the number of property transactions in 2020 fell by 17%, which nevertheless had almost no effect on prices. This shows that sellers are prepared to wait longer and are not inclined to offer a discount for a quick sale, while buyers, for their part, are ready to buy good properties straight away, without waiting to see whether the market drops by a few more per cent.
Most analysts agree that investing in Spanish property was and remains profitable, both when buying to resell later and when buying to let.
In 2020 the most pessimistic forecasts expected property prices to fall by 10%, but the final figures showed no fall at all. The average price per square metre of resale homes in Spain in December 2020 was €1,719, 0.47% higher than in December 2019.
For 2021 the worst forecasts speak of 4-7% at most, and in reality we will most likely see a result similar to last year’s. Market stability will also be supported by rising demand for Spanish property from foreign investors: analysts forecast that the number of transactions involving foreign buyers will grow by 20% this year.
Analysts also say that, when choosing between renting and buying a home, Spanish buyers increasingly opt for the latter: this was very noticeable in 2020, and the trend will continue in 2021. Finally, demand for new homes will keep growing, both among Spanish citizens and residents and among foreigners.
Returns on property investment in Spain in 2021
Buying property to let will remain profitable. According to Fotocasa, Spain’s largest property sales and rental portal, the rental yield in 2020 was 6.8%, 0.2% higher than in 2019 and 1.5% higher than in 2015. The 2020 figure is the highest in the last 10 years. And this despite rents in large cities falling by 10% during 2020.
The 6.8% figure is the national average. This means that there are provinces where the yield may be lower or higher. Among the latter are Toledo (8%), Valencia (7.4%), Sevilla (7.3%), Lleida (7.2%), Navarra (7.1%), Huelva (7.1%), Castellón (7.1%), Murcia (7%), Segovia (7%) and Almería (6.9%). If we look at the Valencian Community (Comunitat Valenciana) as a whole, we see a figure of 6.9%. Catalonia (Cataluña) is slightly behind at 6.8%. No low-risk financial product today can deliver a comparable return.
Among the regions lagging behind, the Balearic Islands stand out, where the yield on let property in 2020 was only 4.8%.
When it comes to the returns on deals where a property is bought for later resale, the figures are even higher. On average, buying a property, giving it a cosmetic renovation and selling it (allowing for all taxes and costs) brings the investor a profit of 15 to 20%.
Will it be possible to find resale properties below market price in 2021? Yes, of course. In any region and any town, excellent opportunities come up from time to time. As a rule, these are urgent sales, when the owner is moving, or a family is settling an inheritance, paying off a mortgage or dealing with financial problems. But on the whole the market will stay at its current level until mid-2022.
