After years of recession, it appears sunshine may finally be glimpsed through the rain in Spain as surging foreign investment looks set to fuel a recovery within the nation’s property market.
As one of the main tragedies of the Eurozone crisis, recovery seemed a distant dream for most Spaniards. However, last year saw foreign property purchases exceed €6bn for the first time since 2004, propelling the once doomed nation onto the brink of recovery.
This surge of foreign investors flooding back to the Spanish property market has positively impacted upon the country’s general economy, which grew by 0.6% in the last quarter of 2013 – the first time it has expanded in over six years.
This resurgence, however, is yet to take effect on house prices, which still continue to dip.
The price falls though are far slower than at the height of the recession, leading many experts to predict that the Spanish economy is set to bottom out, with the recession’s end seemingly in sight.
Home prices fell 7.2% on average in January 2014, 2% less than a month earlier and almost half last year’s 13.8% decline, while prices on the Mediterranean coastal resorts fell just 4.8%; a dramatic reduction from the 11.7% drop in December 2013.
Traditional foreign investment locations, Seville and Barcelona, even managed to see price hikes in January 2014, jumping 3% year-on-year, as a result of increased interest among foreign investors.
Foreign investment levels, in fact, rose throughout the country by as much as 9.8% last year, as interest levels in Spanish property soared for the first time in years.
Indeed, the latest Overseas Guides Company Quarterly Index reported a 37.8% year-on-year increase in foreign enquiries into Spanish property last year, as investors flocked back to the market.
This interest is set to remain consistently high within the coming months, with property experts Knight Frank claiming to have experienced a 29% increase in searches for properties in Spain in Q1 2014, compared to the same period last year.
Banks burdened with re-possessed real estate following the crash are also experiencing surging interest levels. Spanish bank, Sareb has sold an average of 60 properties daily since the beginning of the year, doubling their company target of selling 30 a day in 2014.
The exchange rate has been cited as a key factor in this revival. The pound dramatically increased in strength against the euro during Q3 2013, from £1/€1.141 at the end of July to over £1/€1.19 by the end of the year.
This increasing strength of currencies, like the pound, against the euro led investors to purchase scores of Spanish property last year, after seeing how much more they could get for their money.
Another factor behind this resurgence has been the new golden visa scheme, which grants automatic residency to non-European citizens investing €500,000 or more in Spanish property.
Savills claim a similar scheme in Portugal succeeded in attracting Chinese investors and, although no figures have been published yet to assess the impact of the deal, estate agents across the country are reporting surging interest levels from the Far East, Middle East and Russia as a result
UK-based property firm Knight Knox International were quick to react to the positive changes in Spain.
The property investment company formed strong on-the-ground relationships in the country a number of years ago and were kept well-informed of the market changes in Spain.
In response to an increasing number of enquiries regarding investment in Spain, the firm promptly launched developments in the popular seaside resorts of Alicante and Marbella.
Their latest Spanish development, Reserva Marbella, was launched at the end of April. It is fully managed by VIME hotels and comprises of fully-furnished one bedroom apartments, which occupy a massive 69 square metres over two floors and have huge 32 square metres terraces.
The one bedroom duplexes are priced from €129,000 euros and the resort expects high occupancy rates throughout the year.
International Business Development Manager, Matthew Lavin, is Knight Knox International’s expert in the Spanish property market and believes the numerous enquiries he receives daily into Spanish property represent a positive change in investor sentiment towards the country.
Lavin commented: “Spain is always going to be a popular destination for overseas investors with 2014 presenting arguably the best time to invest.
“With historically low prices and a strengthening GBP, buyers can remain confident of mid to long term returns, running alongside the lifestyle benefits owning a property in the sun brings.”
A report by Spain’s society of property registrars shows that Spanish property remains the most popular among British investors, claiming Britons are responsible for more property purchases in Spain than any other country, accounting for 15% of all sales to overseas investors.
French investors purchase the second most Spanish property accounting for 10% of overseas investment, while Russians are the third keenest on acquiring Spanish property representing 9% of foreign investment.