/ COSTA BLANCA PROPERTY MARKET REPORT / 2017 1 COSTA BLANCA PROPERTY MARKET REPORT 2017 Spanish Housing sales Increase 15% in Q2 2017 to Hit Seven-Year Highs. New built property prices are certainly rocketing upwards with a 10% increase in Q2 2017. Foreign buyers represent 13% of total sales, 15.995 this quarter. 2 According to Spain’s Ministry of According to the Ministry of Development, the housing market has Development, the purchase of housing by shown increased transaction activity in foreign has increased over 24 consecutive 2017, buoyed by consistent double-digit quarters and is currently at historical growth. Between April and June, 141.582 highs. In 2016 the total property sales of property transactions were completed, foreigners was recorded at 16,2% for the representing an increase of 14,7% year-on- year, whereas sales had risen 17% by the year and the best performance since 2010. end of the first quarter of this year. This rebound comes after the 18,5% year- on-year boost experienced at the start of the year, which resulted in 122.787 homes being sold. As a result, the first half of the year saw 264.369 sales, while in the last 12 months the figure was close to half a million, showing an increase of 14%. Another notable fact is that resale property continues to take the lion share of sales recording 128.833 transactions, 90% of those completed between April and June. Foreigners Account For 13% of Sales As far as the nationality of the buyers is concerned, 13% had foreign origin. Foreigners completed 15.995 property transactions. The provinces recording the highest number of sales by foreigners were Alicante (4.931), Málaga (2.863), Barcelona (2.103), Madrid (1.726), Santa Cruz de Tenerife (1,666) and the Balearic Islands (1.493). The transaction activity in these provinces reflects their increasing appeal as tourist destinations in recent years. 3 No. of property sales (Ministerio de Fomento data) 4 housing market. 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Spain’s definitelytwo-speedsin are definitelystabilised,althoughthere priceshave Property Prices 1000 1500 2000 2500 500 0,0 Q1 2004 Q1 2004 Q1 2004 Q1 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 • Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 5 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Price €/m2 Costa Blanca Property Price Evolution Q12005-Q22017 PriceEvolution Costa BlancaProperty 6 Spain Community Valencian Alicante Province Average* Costa Blanca Average North Costa Blanca Average South Costa Blanca Benidorm Javea Denia Pola Santa Orihuela Torrevieja Area MARKETREPORT PROPERTY BLANCA COSTA 1000 1500 2000 2500 500 0,0 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 2101,4 1698 1764,3 2296,1 2577,4 2055,2 2915,3 2481,1 2875 2163,3 2009,1 2145,4 Peak Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 1455,8 1114,9 1196,9 1249,8 1423,1 1075,6 1513,6 1294,1 1241,4 1153,5 989,9 1017 Trough Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 1530 1146,6 1340,03 1297,06 1568,5 1111,56 1706,1 1607,1 1392,3 1206,6 1071,3 1056,8 Q2 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 -27% -32% -24% -44% -39% -46% -41% -35% -52% -44% -47% -51% change Peak-to-present Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 5% 3% 12% 4% 10% 3% 13% 24% 12% 5% 8% 4% change Trough-to-present Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 2017 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 The conclusion we made in the previous report were these figures illustrate the Costa Blanca market’s dynamism in comparison with the national market; for the good and for the bad. The coast’s peak-to-present decrease is much more extreme than the national drop of -27% but the trough to present increase is stronger than the 5% rise registered nationally. As the graph shows, prices are certainly not rocketing upwards but there is real stability now on the Costa Blanca, the reason that there is not a more clear positive trend is due to the disparity in price performance between different localities illustrating on a smaller scale the two-speed market that has developed in Spain. One thing to be taken into account when looking at the average prices is that they are applicable to the built area of a property and do not take into account the value of plots associated with properties. Therefore they will be accurate for apartments and duplexes but for villas and townhouses the value of plots should be added to the cost of the property at an average of €200/m2. An example would be a property with a built area of 100m2 and a plot of 500m2. According to the formula the building would be valued at €147.050 with an additional cost of €100,000 for the plot leaving the property as a whole valued at just under €250.000. Any variations on this formula will depend on the specific property’s location, whether it has sea views etc. but it can be used a general guideline. We have included a table of the average asking prices per metre squared according to Idealista, the prices may be 5%-10% above real market prices as most sellers put their property on the market at a higher price in order to be able to give discounts if necessary. • 7 COSTA BLANCA PROPERTY MARKET REPORT 2017 Costa Blanca South The Costa Blanca South runs from Alicante City to Pilar de la Horadada on the border with Murcia region, the area has long been extremely popular as a tourist destination for both Spaniards and foreigners and its relatively flat landscape has made it into an area ideal for extensive property development. The epicentre of the Costa Blanca South is the city of Torrevieja which has a year-round population of approximately 90.000 which expands to 400.000 at the height of the tourist season in July and August. Demand for Torrevieja property collapsed during the crash and this coupled with a large amount of supply in the area meant prices dived. Since bottoming out prices in Torrevieja have begun to rebound and in the latest data for Q2 2017 they were up by 4% on minimums and -0,02% year-on-year. The recovery was even more marked for the neighbouring Orihuela municipality which has become perhaps the main focus of new development on Spain’s coasts since the crisis. Surprisingly prices in Orihuela Costa stabilized in the second quarter of 2017, from 1060,40 Euros/m2 to 1071,30 Euros. The main reason as was forecasted in the previous report has been Brexit has provided a potential threat to prices in less sought-after areas of Orihuela municipalities due to their high percentages of property owned by British and strong reliance on British buyers. The possible simultaneous impact of a rise in supply due to Brits selling up and a drop in demand from the British have put downward pressure on prices.