Overseas Property Market Shows Signs of Recovery After Three Tough Years

The first two months of 2020 indicated an exceptional year for the real estate sector in Spain, but then came the pandemic, and the country saw a 75 per cent drop in property sales in March 2020 compared to the same month of 2019. The state of alarm in Spain was finally lifted on June 21, and the first whole month without alarm status from the pandemic brought with it both positive and negative news. On the one hand, sales grew by 20 per cent in July compared to the previous month, confirming a market revival after confinement. But on the other hand, the number of real estate transactions totaled 32,654, a 32.4 percent decrease compared to July 2019, in what constitutes the fifth consecutive year-on-year decline, and the fourth drop of more than 30 percent.

The number of Spanish properties sold in July 2023 is the highest recorded since March 2020, when the alarm state and confinement for the COVID-19 pandemic began and represented a 20 per cent increase from June. This gain is the highest monthly increase rate in five years, according to INE (the Spanish Statistical Office) data. In year-on-year terms, the real estate market marked a huge decline of 32.4 percent, following the collapses of March (18.6 percent), April (39.2 percent), May (53.7 percent) June (34.3 percent). Thus, so far this year, 26 per cent fewer homes have been sold than in the same period last year. It should be noted the restriction of activities due to the pandemic is affecting all economic indicators in the country, with figures never seen before, not only in the real estate sector.

By property types, used home operations fell by 34.9 percent to 25,887, while new home sales fell by 21.2 percent over the same month of the previous year to 6,767. By autonomous communities, operations declined in all regions except the Basque Country, where they increased by 14.7 per cent compared to July of the previous year. The Canary Islands (54.8 per cent), Balearic Islands (42.9 per cent), the community of Madrid (41.1 per cent), and Catalonia (36.5 per cent) recorded the most significant declines. Andalusia was the region that carried out the most property transactions in July, with 6,620 sales, followed by Catalonia (5,032), the Valencian Community (4,676), and Madrid (3,890).

Strong recovery

According to some experts, the data reflects that the market is recovering “vigorously” and that upcoming statistics will show significant monthly increases, albeit still below pre-pandemic figures. In addition, they attribute the July decline mainly to the fall in foreign investment in the face of mobility restrictions imposed by various countries towards Spain.

“In June and July, the market has strengthened well after confinement, as many of the transactions carried out were prevented by the period of inactivity,” says the general coordinator of the National Federation of Real Estate Agencies (FAI), José María Alfaro. In his view, the market will gradually regain the trend towards price stabilization and slightly lower transactions, which was already seen in early 2020.

The monthly sales data from Fotocasa, a leading Spanish property portal, indicates that demand has “woken up strongly after confinement,” according to the Director of Communications, Anas López. Following the adjustment period, after the new Mortgage Act came into force in the summer of 2019, which created extra obstacles for foreign buyers, the market had picked up pace in February 2020, to slow down significantly in March due to the pandemic. After the draconian confinement in Spain, in Lopez’s view, the revival of demand has been “very fast,” and there is “a lot of desire to move homes among the population”, which “could indicate that recovery in the sector may be faster than expected.”

Idealista spokesman Francisco Iñareta has also said that the data confirms that the market has begun to regain its pulse since the de-escalation began. While many transactions signed in the first few weeks after the state of alarm ended were postponed by confinement, Spain saw purchases by citizens who decided to change homes during the lockdown and plenty of investors in search of property bargains.