Is the Spanish Property Market Returning to Glory?

After the global downturn hit in 2008, Spain rapidly fell in popularity with property investors amid plummeting prices and shrinking demand. However, 2014 saw the country’s property market and wider economy embark upon an apparent comeback which has grabbed back the attention of the world’s buyers.

One factor that made 2014 such a positive year for Spain was a record-breaking tourist season. The country is a major tourist destination, and remains particularly popular with tourists from the UK. As such, Tourism makes up a significant portion of Spain’s economy – around 10% of its GDP – and a strong economy is naturally good news for the property market. From an investment point of view, there is also a more direct relationship between tourism and property, as many investment properties take the form of holiday homes and other forms of tourist accommodation. A strong tourist season makes for higher demand, increasing values, and more investor attention.

August alone saw a massive 9 million tourists come to Spain. Compared to the same month in 2013, this is an increase of 8.8%. Altogether, the first eight months of 2014 saw Spain visited by 45.38 million people. As well as driving up demand for tourist properties, this has led to significant job creation. For the first time in several years, Spain’s unemployment rate is below 25% and this is expected to give a noticeable boost to the domestic property market. Furthermore, tourist funds are one of the chief sources of income for many businesses in popular coastal areas and major cities, so a strong tourist season also stimulates the commercial property market.

Spain’s recovery has decidedly grabbed the attention of international property investors who had previously departed for rosier-looking markets. This has been helped by Spain’s developing infrastructure and the general improving health of the economy off the back of the strong tourist market. However, investors are also attracted to the fact that Spain appears to be just poised on the brink of recovery after years of falling property prices. The result is a wealth of properties with prices still low, yet a lot of potential for capital growth and a generally strong future if the recovery continues as forecast.

Buying activity grew by 20.7% in 2014, according to analysts from BBVA, a major Spanish bank. The analysts also forecast continuing double-digit growth through the coming year. The growth in transaction volumes has largely been centered around the country’s prime markets, both residential and commercial, and many investors at the top end of the market have been buying with cash. There has been a particularly notable increase in investment from outside the EU, especially the Middle East.

For Spain, the UK has long been a major source of property investors as well as tourists. 2015 is forecast to see a big surge in investment from UK buyers, partly thanks to changes to pension rules. Pensioners in the UK will now be able to take part of their pension pot as a lump sum for investing as they choose, and Spain is expected to prove an attractive market.

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