The market of Spanish real estate reached a peak in the fourth quarter of 2021, with the Costa del Sol region being particularly successful (where at least 91 residential units changed hands there every day). This post explores the situation in 2022.
Content:
- How was the Spanish market developing last year?
- Price growth in the residential property market
- Regional price hikes
- Higher sales volume
- Return on investment in rental property
- Best investment in the Spanish real estate market in 2022
- Foreign demand for Spanish real estate
- Should I invest in Spanish real estate in 2022?
How was the Spanish market developing last year?
The year 2021 was successful for the Spanish real estate market when a total of 545,000 transactions were made in the country, which was the best performance since 2008. The average cost per square meter was EUR 1,877. This is 5.8% more than in the fourth quarter of 2020, and almost 6.5% more than over the months preceding the start of the COVID-19 pandemic.
It should be noted that investors received a solid return on their investments. According to statistics published in mid-2021 by the Bank of Spain, the expected profit margin in the residential property market exceeded 7%. This is a powerful argument for people interested in investing in Spanish residential facilities.
At the moment, investors from many countries are focusing on the Spanish real estate market. In 2022, foreigners will again account for a significant share of all buyers (about 10%). Several experts believe that this percentage will grow even higher by the end of the year.
Price growth in the residential property market
The Spanish house price index for the first quarter of 2022 published by the valuations company Tinsa IMIE shows that the value of residential units increased by 6.6% compared to the same period of 2021. The quarter-on-quarter growth was 2.3%.
The valuations firm adds that the average price increase in the first quarter of this year was equal to the increase observed in the fourth quarter last year and contemplates whether this could be a sign of market stabilization. There is a note in the report saying that prices were still growing rapidly.
Regional price hikes
Madrid is at the top of the list of autonomous communities due to its housing prices hike in the first quarter of 2022. The value of residential property in this region grew by 11.3% from January to March.
The increase in the Balearic Islands and Andalusia was single-digit, but both regions are still high in the ranking. Residential facilities grew 8.4% more expensive on Mallorca, Menorca, and Ibiza Islands. Andalusia – home to Costa del Sol – experienced a 7.7% rise in real estate value.
Higher sales volume
The index published by Tinsa IMIE also takes into account the number of transactions made in different Spanish provinces. Almería is the leader in sales volume relative to supply in the real estate market. Over the last quarter of 2021 (the latest available data), 36.2 transactions were made in this province per 1,000 residential units listed for sale – the highest in the country.
Costa del Sol is the region with the biggest sales volume. In the fourth quarter of 2021, the ratio between the number of transactions made and the supply was 40.8 to 1,000 properties, which is well ahead of the national average. However, the average sales volume also grew significantly across the country, from 18.9 to 26 transactions per 1,000 residential units.
The number of land plots purchased and sale transactions surged by 45% over 2021, which increased the average price of a land plot in Spain by 11%. The demand for land and new development projects is expected to continue, but the value of land plots will be growing at more moderate rates in the future.
Return on investment in rental property
There are no reasons to believe that return on investment in rental property in Spain will decline in the nearest future. As already mentioned, analysis conducted by economists shows that last year’s profit margin exceeded 7%. As for the return on investment, Spain has been enjoying an upward trend for many years, and there is no indication that it will slow down.
Here is the return on investment performance in recent years:
- 2010 – 4.3%;
- 2011 – 4,3%;
- 2012 – 4,6%;
- 2013 – 4,8%;
- 2014 – 5%;
- 2015 – 5,3%;
- 2016 – 5,5%;
- 2017 – 6,2%;
- 2018 – 6,2%;
- 2019 – 6,6%;
- 2020 – 6,8%.
The spread of the COVID-19 infection couldn’t avoid affecting the rental market, but after a period of decline, profit margins gradually started climbing back to the pre-pandemic level. The average rental rate of a house in Spain in 2022 is EUR 1,441 per month.
Some of the most expensive property rental locations in Spain are:
- Catalonia – EUR 2,944 per month;
- Balearic Islands – EUR 2,799 per month;
- Basque Country – EUR 1,585 per month;
- Madrid – EUR 1,379 per month
- Andalusia – EUR 1,307 per month;
- Valencia – EUR 1,264 per month.
At the other extreme are Extremadura (EUR 280 per month), Asturias (EUR 505 per month), Castile and León (EUR 649 per month), Aragon (EUR 670 per month), and Murcia (EUR 698 per month).
Best investment in the Spanish real estate market in 2022
Investors are focused on the most popular regions. Elite real estate is particularly sought-after because it is quite crisis-resistant. Elite apartments and villas in Spain are a good investment in a time of almost universal inflation (which reached 6.7% in Spain by the end of 2021 – the highest over the past 30 years).
The elite housing sector, especially on the Costa del Sol coast, has kept growing over the past 18 months. The sales volume remained high even at the peak of the pandemic, particularly among international investors. United Kingdom’s exit from the EU reduced the number of less prosperous British buyers but spiked the interest of big investors.
At the moment, the demand in the elite real estate sector is starting to exceed the supply. Fewer and fewer new high-end facilities are listed for sale, which will significantly affect the market throughout 2022.
Foreign demand for Spanish real estate
Foreigners feel more and more at home across Spain, as they accounted for 17% of real estate sales in 2021, according to Spain’s General Council of Notaries. Romanian and Moroccan nationals are happy to buy homes in various regions, while traditional resort destinations, especially on the seaside, are buzzing with tourists from Western Europe. Valencia seems to be particularly attractive to the British even after Brexit, while Germans prefer the Balearic Islands and Italians, the Canary Islands.
Citizens of other countries without permanent residency are mostly British and French, followed by Germans, Belgians, and Americans craving the warm Spanish sun, exquisite wines, and unique culture.
Although major cities and beachfront homes remain the most popular choice, many visitors are now beginning to consider smaller towns and villages that offer unparalleled serenity, privacy, and low prices, while the sea is still only a few minutes drive away.
Should I invest in Spanish real estate in 2022?
Real estate in Spain keeps attracting foreign investors and end-users. Most analysts concur that the local market will continue growing. According to forecasts, in 2022, prices will be higher than in 2021 but lower than in 2023. So if you have been planning to buy an apartment or a house, postponing it for a long time is not the best investment strategy.