New homes are built to high quality, Spanish housing market blog part 3/3

29 Dec 2018

New homes are built to high quality, Spanish housing market blog part 3/3

  • Spanish housing market developments in the 2000s.
  • Is it a good time to buy your own apartment in Spain?

In a few previous blogs, we have focused on the different phases of the Spanish housing market, both in housing and housing prices. To sum up, housing prices have risen by about 5-7% annually since 2014. In this blog, we are focusing more on the present moment on the Costa Blanca, Alicante and assessing the current state of the housing market. I am also using my little crystal ball and estimating the development in the housing market in 2019.

In residential construction, the pace has again accelerated and new housing was sold in the Alicante region during the three quarters of 2018 by about 10% more than in the corresponding period in 2017. The full-year forecast is that the amount of new apartments sold in the Alicante area will be about 5,000. Housing sales have also increased for second-hand housing. Since the beginning of 2018, 15% more used homes have been sold in the Alicante area compared to the same period in 2017. If the trend continues, the number of used apartments sold in the Alicante area in 2018 will be approximately 46,000.

Who are buying the apartments?

In Alicante, almost half of the homes are sold to foreigners. Spanish buyers accounted for over half of Q1-Q3 in 2018, or 51.3%. Traditionally, the British have been the largest single housing buyer group. In the peak years of housing sales, the British bought up to 25% of all apartments sold to foreigners. Last year, the share of British buyers remained at 15% due to continued Brexit speculation. Next, the largest number of homes was purchased by French, with 8.6%, Germans 7.7%, Belgian 6.4%, Swedes 6.3% and Italians 5.7%. The pick-up in housing sales, despite Brexit, shows that demand is coming from many different countries, especially in the Alicante region, and that the purchasing volume is not dependent on English buyers. Finnish buyers cannot be found among the first 20 countries, so the best guess is that Finns account for 0.8-1.1% of foreign buyers.

What kind of apartments are now being sold and what could be interesting to buy?

The quality of the construction of new homes has improved considerably over 10 years. The improvement in quality is affected by the renewal of the building regulations after 2007 and the increase in the demand of buyers. It is no longer enough to have a roof over your head, but buyers want a garage and storage space, large oasis with swimming pool, spa and green areas. To have a gym in the urbanization is not a rarity. Traditionally, in Spain, houses have had to be built to withstand earthquakes, but after the boom season, other building regulations have emerged. Nowadays apartments have to be insulated against heat and coolness, windows are heat glasses and water heating works with air-heat. At the moment, it is also normal for bathrooms to have underfloor heating and kitchens are often equipped with a Scandinavian taste. The quality of the new homes is really good and the design has taken into account the light and the heat effects of the sun. When buying a new apartment, you should first consider your own use, how much you use and what time of year. After that, you should consider the location and the investment aspect.

In the case of second-hand housing, the situation is that if there is no renovations done to the apartment, its about time to start. Residential bathrooms and kitchen design and furnishings no longer meet the demands of modern renters or long-term housing. On the other hand, making or commissioning a renovation in Spain is considerably cheaper than in Finland. For example, a € 6,000-8,000 renovation is enough to renovate the bathroom and kitchen. For used housing, you should invest in the location and prepare for the renovation of the apartment. The Torrevieja city area still offers good and sunny apartments at a very competitive price. Torrevieja's attractiveness as a rental city has also increased rapidly in recent years, offering the opportunity for the owners to rent their apartment when they are not there.

What does the future look like?

For 2019, we see that, despite Brexit, demand will continue to be strong. Already now, a new group of house purchasers has arrived from England, millions of its migrant workers from Central and Eastern Europe, as the potential Brexit may eliminate their free labor mobility. The price level in Spain, for both housing and living costs, still makes the country a very attractive place to live and invest. In addition, Torrevieja is the healthiest city in Europe with its salt lakes and is very safe to live in, and these are important factors for foreigners moving here.

However, new housing prices will rise more moderately than in recent years. This is due to the location of new construction sites further away from the sea and the city center, with a few exceptions. For used housing, prices will rise more. This is due to the continued strong demand from European buyers and the demand for homes that are also favored by Finns. These apartments should be sunny, in a good area or with their own roof terrace.

The strengthening of the Spanish economy makes the housing market stable and supports the rise in prices. For housing investors, this provides a good basis for making a return on their investment.

For the question of whether it is a good moment to buy your own home from Spain, our answer is yes!

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