Trends of purchase market in Spain as an investment product
We are experiencing, during the last few years, a drop in interest rates in Europe. Interest rates in Europe have never been as low as those we have been seeing for the last five years. This means that returns obtained through savings, deposits, and investment funds are reduced. Prudent and moderate investors, who does not invest in risky or high-risk financial investment products, find that they obtain very low returns on investment products such as short, medium, or long-term deposits, as well as investments in moderate positions.
This fact, accompanied by so interesting prices in real estate in Spain after the crisis of real estate boom from 2007 to 2010, has converted Spanish real estate sector as an interesting destination for those investors who are looking for a safe return , but higher than they can obtain in funds and deposits through financial, savings and investment entities.
It is considered that there is a general feeling that real estate prices in Spain have bottomed out, that they are not going to go down much more, and that there are high expectations that prices will rise in the future, generating interesting gains and returns in half -long term.
Thus, we have witnessed a an increase in investment in the Spanish real estate sector, by investors coming from both, investment funds and individuals, who have directed their investments in Spain to obtain returns through the purchase of properties at prices with a high growth perspective in the medium-long term.
This investment activity has also been increased by the appearance in the market of Internet portals and platforms which have favoured and encouraged the activity of renting/leasing between individuals, especially those destined for tourist and vacation use. In coastal areas or others with high tourist interest, it is easy to manage properties for these investors, through these portals, given the ease way of management, and the boom that these portals have acquired in recent years. We have witnessed a revolution in the rental sector worldwide, and specifically in Spain, where homeowners in tourist areas have been allowed to access to the rental market directly, and without passing through the control of intermediaries, as Agencies, or tour-operators.
In addition, there has been an increase in demand in the tourist sector interested in managing their holiday through rental apartments, as a more interesting option, flexible and economic, than traditional hotel chains, and traditional accommodations, much more rigid, and higher priced than private and direct rentals.
All this leads to the conclusion that the Spanish real estate product has been subjected to an increase in real estate transactions and purchases by both grouped and individual investors who have seen in the Spanish real estate market an opportunity for destination of their investments, as much for the excellent price of the properties in Spain, as for their profitability through the tourist rentals.
On the other hand, from the years 2009-2010, the interest in purchase of housing in tourist areas in Spain has passed to be only the “residential”, to become, in addition, an “investment product”. In the “Post-Boom” period, we have witnessed a boom in the real estate sector for residential and private use, who are those who have acquired a home in Spain, either to reside, or to use it in a particular way. But in addition, and in parallel, we have seen an increase in the volume of real estate transactions carried out by investors, who have sought a positioning of their funds in a safe sector which is the real estate, in addition to those who have also sought returns through rent, much higher than those offered by investment products such as deposits, bonds, or mutual funds.
Globalized nature from the investor
The origin of investors in Spanish touristic real estate product has become totally “globalized”. If in the past the investor was purely Spanish national, today we are witnessing the opposite. There is a large majority of international buyers coming from not only Europe (UK, France, Germany, Netherlands, Belgium and Nordic countries, etc.) but also from other countries such as China, Russia, Eastern Europe, USA, Latin America, etc.
What is the scenario of the Spanish real estate market in tourist areas for 2017 2018?
In relation to equities and equity market, the year 2017 is a year in which we are witnessing major political changes worldwide creating high instability. Important changes have been since Brexit, change of course in US government, and its economic and international policy, and a year in which the great countries of the European community, France, Germany, and formerly Holland, are in electoral processes with new political groups are getting power over traditionals.
These events have caused high instability that makes short-term investment horizon more diffuse in risk products. This causes to prudent investors to move away from financial investment products with variable rates that may endanger not only the returns but the investment itself.
So the investment in Spanish real estate, overall in high touristic areas, is presented as a much safer and interesting option.
On the other hand, with regard to the fix interest market, such as deposits, bonds, etc, irrespective of the instability of the international context, it seems that the long-term decisions of the European Central Bank go through maintaining the reiterated policy of low interest rates. European Central Bank, through its representatives, strives to confirm the long-term policy of low interest rates. Thus, from the point of view of the investor, it does not appear that the scenario will change during this year, nor during the year 2018, in terms of fixed income.
Therefore, this brings us back, to confirm the position of the Spanish real estate market, as a destination of the investments for those who want to obtain a higher profitability, through the purchase of properties at very interesting prices in that state in the real estate sector, as well as the profitability obtained through the rent, and the possibilities of access to the market of rent, that carry much higher yields.
Therefore, it seems that, at least for the particular investor, Spanish real estate-tourism sector is confirmed as an important interesting destination aimed at the purchase of real estate in the years 2017-2018.
Meanwhile, for residential purchasers, that is, those who buy with the intention of making private use of the house, housing prices in the market remain very interesting, without prospects of large increases in the short term.
As far as residential use is concerned, the years 2017-2018 can be also good years of buying property in Spain.