Spanish real estate continues to appeal to people seeking a second residence. In the first half of 2023, more than 20 percent of all homes in Spain were sold to foreign house hunters.
Why is this important?
Why is this important?
Like the rest of the eurozone member states, Spain is not immune to the consequences of the European Central Bank's (ECB) tightening monetary policy. This has led to a significant increase in the cost of mortgage loans, resulting in fewer real estate transactions. The stricter credit conditions particularly affect Spaniards themselves. However, foreigners continue to find their way into the Spanish real estate market.
In the news:
Spanish real estate remains popular among those seeking a second home. During the first half of 2023, they purchased 21,580 properties in this Mediterranean country, according to data from the Spanish land registry (Registradores de España).
- Among all foreigners, Britons purchase the most Spanish real estate. 10% of homes bought by non-residents are in their name. Germans and French complete the top 3.
- Belgians rank fourth with 5.4%, followed by the Dutch with 4.8%.
A total of 3,483 Belgians purchased a Spanish property during the first three quarters of 2023.
- “Most transactions by foreigners occur in the Balearic Islands, Costa Blanca, Canary Islands, and Costa del Sol,” adds Carl Vorsselmans from the real estate agency Nieuwbouw in Spanje.
Impact of rising interest rates
Noted: ECB interest rate hikes mean that prospective homebuyers have to put more money on the table when taking out a mortgage. This has led to a decrease in the number of real estate transactions in Spain.
- “Nationally, we see a 23.7% decline in sales in Spain, the largest drop since 2020,” clarifies Vorsselmans.
- In the Canary Islands, the decline is greatest at 40% (year-on-year), according to the National Institute of Statistics.
Frederik Hoogewijs, business development manager at Nieuwbouw in Spanje, notes that rising interest rates primarily affect local residents. “There needs to be a distinction in the buyer profile. We observe that buyers of second homes are less sensitive to interest rate increases than local buyers, for whom it's often their first and only residence, with location also differing.”
Why do foreign buyers experience less impact from interest rate hikes? Vorsselmans explains: “They are typically older or retired and thus have substantial savings. This money can be used to invest in real estate. First-time homebuyers have to borrow more and are therefore more sensitive to interest rate fluctuations.”
Source: businessam.be