Foreign Investment Powering Spain’s Property Markets
It's a situation mirrored throughout the world's luxury real estate markets. Revenue inflows from foreign investors and buyers of Spanish real estate are at an all-time high, currently representing around 12.2% of residential property transactions in Q1 2015.
Large-scale real estate investors like London-based Europa Capital are building high-class residential units and selling them on completion to almost entirely foreign buyers. The firm's latest project is being managed by local developers Bonavista Developments and is located in Barcelona, the focus of considerable interest from foreign buyers.
The big-ticket development which is expected to be completed this year comprises 14 luxury apartments with a rooftop pool. All units have been sold for prices between ?600,000 and ?1.85m with 12 going to foreigners, representing an 85% take-up from overseas buyers.
That is just one illustration showing the degree of foreign buying that is being duplicated across Spain's most popular locations like Madrid, Barcelona and the Costa del Sol. According to Spain's property registrars' society, foreign nationals bought just over 12% of residential property in the first three months of the year, an increase of 9% for the same period in 2006.
Alex Vaughan, co-founder of Lucas Fox in Barcelona said: "At the high end - ?500,000 and up – it's primarily being driven by international demand". The luxury estate agent sold two-thirds of the Bonavista project and last year, 91% of their total 126 home sales were to foreigners looking for luxury bargains in Spain.
Developments in FOREX markets have shifted the buyer demographic in 2015 with more investors from the Middle East and America dipping their toes in Spanish real estate, taking advantage of dollar strength. Euro weakness has encouraged Brits and non-EU buyers, (particularly attracted to the benefits of Spain's golden visa programme) and interest from Russian buyers has been soft due to the rouble's collapse.
In Spain's residential markets foreigners are making a big impact and its commercial markets are seeing even more action. According to CBRE Spain, out of ?10.2bn invested in commercial real estate in the country through 2014, more than 50% came directly from foreign funds with a further ?2.5bn coming from Socimis - real estate investments that are traded like shares on exchanges – largely funded by foreign investors.
Residential property has a tendency to follow in the steps of commercial real estate, with around 12 months lag in general. Commercial investors operate on different dynamics than buyers of residential in that they select areas that will best facilitate and support their own growth and expansion. Residential investors seek to reap the benefits of that growth and expansion in the commercial sector that drives up demand for homes in the residential areas.