Of course yes! In Barcelona, with the whole stock market thing being so unstable, the housing market is like hotcakes. Right now, people see houses as a safe haven to put their money, especially here in Barcelona, where rental prices do not stop rising. And you know what, there are more foreigners and students willing to pay extra for a place to live, like 30% or even 50% more than locals.
Look, according to data from the National Statistics Institute, almost 13% of the population in Spain are foreigners. And those tourists are going all out, paying about 500 euros more per month in rent, which is 50% more than what Spaniards pay.
So, what you need is to choose the area where you invest well and make sure that the apartment is ready to put people in right now. This is key to minimizing risk and, if you invest in central neighborhoods, you are assured that you will quickly find a tenant.
And wait, it's not all bad news. Even though some places are putting obstacles in place with new housing laws and the purchase of new homes is going down, the lack of rental supply is what will make you money. According to the INE, second-hand housing transactions have increased by 28.3% and the price of these homes has only decreased a little.
Although it is difficult to get financing from banks to buy right now, people still need houses to live in, so the rental market is more active than ever.
And best of all, profitability is through the roof. Rental prices are skyrocketing, especially here in Barcelona, where people are paying an average of 1,087 euros per month. Since 2020, the profitability of investing in apartments in Barcelona has risen from 4% to 6%, and some say it can even reach 7%.
With so much rent going up, there are more and more people looking for small apartments. Foreigners and students are crazy about apartments of around 50 square meters, and if they are in the center, even better.
In Spain, house prices are on fire, unlike in other eurozone countries that are already feeling the chill of the slowdown. What's going on? It's not that easy to understand, but you have to take a look at a lot of things that are happening at the same time to understand why Spain is going to its guns in this.
In September, house prices in Spain rose 2.1%, while in the eurozone they barely moved 0.1%. How can it be? In the second quarter, according to Eurostat data, our neighbors in France, Germany and the Netherlands saw prices drop by 1.7%, but we rose by 3.7%!
The logical thing would be for it to be the other way around, right? But the rise in prices is directly affecting mortgages (-18.8%) and home purchases (-10.5%), which have been declining for six months according to the National Institute of Statistics (INE). But be careful, the slowdown in these numbers is softer than in other countries.
And here comes the cool thing. There are several things that make the Spanish real estate market unique. The analysts highlight six things:
More families on the track. The number of households has grown a lot, partly thanks to immigration. More families and fewer homes available drive prices up.
The economy is strong. Spain is growing more than the eurozone average, according to the Bank of Spain.
Although unemployment is through the roof, the economy continues to give its all. We have even recovered purchasing power! Spanish families have more cash in their pockets, thanks to higher salaries and less inflation. The result? Many people want to buy a house.
Hello foreigners! Outside investors are cool with our houses. Foreign demand is putting more pressure and raising prices, especially on the coast, the Balearic Islands and the Canary Islands.
Tourist rentals are also doing well. Since COVID restrictions were lifted, the return of tourism has caused owners to rent their homes, reducing supply and raising prices.
The pandemic also influenced construction materials. Fewer projects, inflation in materials, and voilà, construction prices continue through the roof.
And what about the European Central Bank (ECB)? Well, they are planning not to raise rates for now, but they are not going to lower them until after the summer of 2024, according to ING Economics. Furthermore, construction prices will remain high even if the trend has cooled recently.
And the last one. During the pandemic, the Spanish real estate market did not heat up as much as in other eurozone countries. According to the ECB, the overvaluation here is 10.3%, less than in most countries. Hey you!
In short, prices will continue to rise, but at a slower pace. Because? Because mortgages are expected to continue rising until the end of the year and economic growth is expected to cool in the winter months.
Real estate agencies specialized in the high-end housing segment have reported an impressive growth of 43% in luxury property transactions last year 2023, consolidating themselves as the epicenter of the real estate market in 2024. This trend, which had already experienced a increase of 175% in 2023 compared to the last three years, reflects the growing preference for this exclusive segment. Currently, around 26% of new housing constructions are aimed at this market, a proportion that shows an increasing trend in the coming years. Demand is mainly concentrated in Barcelona and Madrid, representing 78%, with Andalusia and Levante emerging as particularly attractive regions for international investors.
Luxury property management experts anticipate growth will continue throughout 2024, pointing to significant increases in key areas, such as 47% in Barcelona, 50% in Ibiza, and 55% in Madrid, as well as a notable increase in sales on the Costa Brava compared to the previous year. In terms of prices, the report reveals a 41% increase in the average price of luxury homes and a 54% increase in the total value of these transactions.
In the first half of last year, approximately 13,300 luxury homes, with a price equal to or greater than 2.5 million euros, were available on the Spanish market, representing 2% of the total supply of 650,000 properties.
The sale of luxury homes in Spain is concentrated in 9 key provinces, which cover 97% of the market. Marbella leads as the epicenter, followed by the Balearic Islands, Madrid and Barcelona. This segment represents 15% of the local market in the Balearic Islands, 9% in Malaga, 3% in the capital, 2% in Barcelona and less than 1% in the rest of the Spanish provinces.
The profile of luxury home buyers in Spain is diverse and international. Citizens of the European Union, the United Kingdom, North and South America, and Asia are the main interested parties in this offer. In 2024, continued growth in demand is anticipated, especially from international investors, consolidating itself as a key factor in the luxury real estate market.
The year 2023 marked a historic milestone for transactions in the luxury housing market, with record turnover and growth figures. Real estate agents expect 2024 to maintain this positive trend, emphasizing that their main target audience is foreign buyers. In the second quarter of 2024, the proportion of foreign buyers reached a maximum of 24,000 sales, generating a year-on-year increase of 76%. This phenomenon highlights the growing influence of international investors in the Spanish luxury real estate market
In October, the numbers continue to resist variations in interest rates, showing a monthly volume similar to that of 2019, before the pandemic. This phenomenon indicates a return to normality and the usual market dynamics after a period of stimulation.
As of October this year, more than 500,000 real estate transactions have been recorded, and it is projected that if this trend persists, 2023 could become the "second or third best year since 2007."
The most recent data from the INE on real estate transactions for October 2023 shows an increase of 4.1% compared to the previous month, but a decrease of 11.1% compared to the same period of the previous year. Despite the year-on-year drop, it is important to contextualize it in relation to August 2022. The October figure continues to resist rate increases and reflects a monthly volume similar to that of 2019, which indicates a return to normality after a period stimulation.
These data reveal that the real estate market is not experiencing a standstill, but rather an adaptation to the new economic situation of high rates, which is expected to continue throughout much of 2024. Although the year-on-year drop is notable, demand remains solid, exceeding pre-pandemic numbers. Out of stock is a prominent problem, and market analysis shows that demand is five times greater than supply in the purchasing market. Higher inventory could drive transactions even further.
As for new construction homes, they continue to generate interest, representing 19.3% of operations in October. Despite the boom, they face challenges due to higher mortgage prices and increased prices compared to second-hand homes. Demand persists, but limited supply and pricing issues could impact growth.
In summary, there is a slight moderation in purchases compared to previous years, influenced by the increase in prices and higher mortgage prices. This change has affected 60% of buyers, leading 28% to stop the acquisition process. Despite the uncertainty, a dynamic real estate sector is expected in the coming months, although with less notable figures.
The second-hand market continues to be a refuge value for investors who see how their money in the bank does not produce anything, instead investing in the brick, and at the price that rent is in Barcelona, they obtain a good return.
The second-hand market in Barcelona, like in many other cities, can be seen as a safe haven for investors for several reasons:
Profitability: The real estate market, particularly the rental market, has proven to be a profitable investment over time. Investors can buy properties on the second-hand market and rent them out to earn regular income through rentals.
Investing in tangible assets: Investing in real estate offers the advantage of owning tangible assets, as opposed to keeping money in the bank, which can lose value due to inflation.
Diversification: Investors often look to diversify their portfolios, and real estate can be an effective way to do so. Combining property investments with other financial assets can help reduce risk.
Constant demand: Barcelona is a tourist city and an important economic center, which means that the demand for rental homes is usually constant. This makes investing in rental properties attractive as there are likely to be tenants interested in leasing the properties.
Low interest rates: In low interest rate environments, such as those experienced in many parts of the world in recent years, investing in property may be more attractive compared to holding money in savings accounts or low-cost financial products. performance.
Value Appreciation Potential: In addition to rental income, investors can benefit from property value appreciation over time. In markets where demand is high, property prices may increase, which could result in capital gains.
However, it is important to note that investing in real estate also carries risks, such as the need to manage properties, deal with potential vacancies, maintain and repair properties, and being exposed to fluctuations in market prices. Investors should carefully consider their financial goals, risk tolerance and conduct thorough analysis before investing in the second-hand market in Barcelona or anywhere else. Additionally, economic and market conditions can change over time, so it is essential to be aware of current and future trends before making investment decisions.
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