Working as a Building Surveyor on the Costa Blanca for over 15 years Mark Paddon has good knowledge of the residential property market in the key geographical areas of EWN readership.
Mark has also consulted for TV programmes including Channel 4’s ‘Selling Houses Abroad’ ITV’s ‘Homes from Hell’ and contributed to Spanish property books. Here’s his outlook on the future of residential property on the Costas.
Firstly it is important to understand that the current health crisis is not directly comparable to the financial crisis that affected Spain badly in 2008 and hence the results will be different. Just prior to lockdown I was super busy with buyer’s structural surveys at double the normal rate, following the Brexit date (February 1st). Costa Blanca and Costa Del Sol agents were also busier than normal with a reported (and very significant) 150% increase in business following Brexit. In short, the local market was booming!
This, of course, does not reflect the entire Spanish market, which had suffered a slight downward trend since a buoyant 2018. The popularity of developments in less desirable inland locations, with the most likely buyers being Spanish, are far more volatile, but let’s face it, most people reading this are ex-pat property owners in the popular coastal areas, (a distinctly different market), which prior to the Corona Virus lockdown were doing well in terms of property values and sales. Current low-interest rates (which are expected to remain for an overlap period) are also typically beneficial to the property market and in contrast to the 2008 financial crisis (where banks got some bailouts but others suffered), in this health-driven crisis, governments are supporting individuals and companies to help them survive.
The Bank of Spain expects the domestic housing market to remain fragile for some time following the lockdown, but it expects international investment flow to find momentum comparatively quickly.
Travel concerns and flight cancellations, of course, put an abrupt stop to property buyers in mid-March, (though personally I already have a list of buyer’s wanting structural surveys as soon as the crisis is over). Likewise whilst some estate agents have seen tentative (early stage) buyers withdraw from negotiations, many also continue to work in shortlisting properties for property hunters and have numerous deals awaiting completion as soon as the notaries are in full operation again.
Lucy Hobbs of Vicens Ash Estate agents Javea comments:-
“We kicked off 2020 with a really good start, lots of viewings and deals made, Brexit had been dealt with and the real estate market in Javea was looking rosy – until now ……. the current global pandemic of Corona Virus has affected all aspects of life and the real estate sector is going to be just one of its casualties. Having said that, all of our clients that were planning on purchasing property in Javea this year have not shelved their plans indefinitely but merely taken a rain check on buying a property in Spain. So there is light at the end of the tunnel and we hope to be completing a lot more sales towards the end of the year.”
The big question in the property sector is the same as in others i.e. how long will this health crisis last? It is a common opinion that if all went back to normal within weeks, the market and demand would bounce back very quickly ( and even if there was a 50% decrease in demand, most Costa Blanca agents would be running at a late 2019, early 2020 rate of business). If on the other hand flights do not resume for some months, the sector would inevitably be harder hit, with prices potentially dropping and the return of market buoyancy being much slower.
It is essential however, to consider that unusual circumstances also result in some unusual positive factors that will help to counteract the inevitable negatives.
- Peoples dreams don’t change (it is only their ability to realise them that changes), so typically if someone is planning to invest in Spain, even if their investment capital decreases, they are more likely to downsize and opt for a smart apartment instead of a 4 bedroomed villa with pool, rather than scrap plans altogether.
- Price reductions fire up demand – If a long haul lockdown results in price reductions, this in part compensates for investment capital losses, so that a potential buyer of a 4-bed villa, might find they can still get a 3-bed villa with a slight post-crisis price reduction, even though they have less money to invest.
- Life changes, change lives!– Despite the unfortunate circumstances and tragic loss of life affecting many families, a lot of (normally busy) working people are actually (at least in part) enjoying this temporary taste of early retirement. They have more time to relax, more time for their partner, more time for their kids, hobbies etc. For some, there will be a reluctance to return to exactly what they were doing pre lockdown and for those that were thinking of buying a holiday or retirement home in Spain, the Covid-19 lockdown will actually inspire some to make a move sooner rather than later.
- Teleworking works! – The sudden need for many people to work from home has accelerated a trend that was predicted many years ago but has taken a long time coming. The health crisis has turbo-boosted a slow pattern into something that is pretty much compulsory now for many sectors. A significant number of individuals will find that they can telework efficiently (actually more productively in some cases) and their employers will realise the same. Where this happens, there is really no logical reason to return to a less efficient and more costly way of working, and some employers may well give the option to their teleworkers to carry on as they are, without the need to commute or have tiresome physical meetings. This, in turn, could actually facilitate future pay rises for some employees as companies spend less on offices and travel etc. In turn, this also presents an opportunity in terms of reducing climate change (THE big topic pre-Corona Virus). Spain already enjoys the presence of people on the costas that telework, some Northern Europeans even manage their whole foreign business operation from Spain. If you only have to attend head office once a month, Spain suddenly becomes a viable (and far more attractive) location to be based.
- People with less money seek a lower cost of living – If you can’t afford that €10 bottle of wine anymore, you don’t give up wine! Instead, you find a €2.95 bottle that fits. Spain still offers a lower cost of living for Northern Europeans and even nations like the French and Belgians have shown a strong interest in buying property and holidaying in Spain, where their money goes much further. When a coffee, beer o sandwich costs 2-3 times as much just across the border, Spain makes sense for many foreign nationals including those from Scandinavian countries, where the salaries and cost of living locally, make Spain a positive bargain destination.
- Reinvestment of wealth – Whilst the loss of elderly loved ones is very sad, it’s a fact that as a result of the pandemic, some people will inherit early, (I often have clients that are investing money left to them by their parents). It is obviously hoped that death rates will be low, but if they are tragically high, logically more families will be in a position to invest inherited wealth sooner than expected. Furthermore, whilst bonds and shares have plummeted in value, Bricks and Mortar have proven to be a relatively safe place to have your money in a crisis of this type.
Nick Snelling, director of Casalasafor Consultancies (property expert for US TV show, House Hunters International and author of How to Buy Spanish Property and Move to Spain – Safely!’) says:-
‘Of course, the property market has stopped dead, but it has in almost every country in the world. However, this is just a pause and the market will recover once the corona-virus is under control and ‘normal’ life returns. Certainly, the fundamentals of Spain have not changed. Property here is excellent value compared to most of northern Europe and if prices drop, then there may be no better time to buy for years to come. Meanwhile, the overall quality of life in Spain remains the same, providing us all with amazing value for money.’
So in summary, the temporary shutdown actually has some positive aspects that will help offset the negatives and the general consensus for the future of residential property on the Costas in Spain is that, whilst exact timings are unknown, provided that the Spanish sun still shines when lockdown finishes and when air travel resumes, the popularity of Spain amongst foreign buyers as a country that offers great value property, a low cost of living and a better lifestyle in general, will help to restart both sales and rentals relatively quickly in the popular coastal regions, and if we are going to suffer any future lockdowns, being stuck in a Spanish villa with a garden and pool is actually not a bad option.