RESIDENTIAL RESEARCH SPANISH PRIME RESIDENTIAL INSIGHT TAKING THE PULSE OF SPAIN’S LUXURY RESIDENTIAL MARKET, ASSESSING WHO’S BUYING AND WHERE SPANISH PRIME RESIDENTIAL INSIGHT SEPTEMBER 2013 MARKET OVERVIEW Spain’s prime residential markets are recovering with Mallorca, Ibiza and Barcelona leading the way. Kate Everett-Allen looks at the latest trends in Spain’s luxury homes market. Spain’s prime markets are on a firmer footing with international mortgages with more favourable some of its more affluent second home hotspots loan-to-value terms. reporting price growth for the first time since KEY FACTS Spanish property sales may have stopped falling the onset of the global financial crisis. Despite but they remain 65% below their June 2007 level. these tentative signs of recovery Spain’s economy The new ‘golden visa’ has now been Prime Minister Rajoy has recognised the housing remains fragile and its mainstream property approved by the Spanish Parliament market’s importance to Spain’s economic recovery market recorded an average price fall and will come into effect in October by announcing the introduction of a new ‘golden of 7% in the 12 months to the end of June 2013. visa’. The new law, which has now been approved Mallorca, Ibiza and Barcelona The outlook for Spain’s luxury housing market by the Spanish Parliament, allows non EU buyers are currently Spain’s strongest is improving. Both the volume of enquiries and purchasing properties above €500,000 to become international housing markets agreed sales have increased in the first half of Spanish residents. It is hoped that investors from 2013. These markets are attracting a broader range Asia and the Middle East in particular will shore The IMF cites evidence of improving of international buyers who have the confidence up some of Spain’s more oversupplied markets economic indicators though Spain’s and finance in place to purchase. Buyers previously as we have witnessed in Portugal. economy remains fragile looking in neighbouring European countries are As one of the 26 European members of the seeing value in Spain and the Balearics once more. Prices in some luxury markets are Schengen accord, residents of Spain or holders c.40% below their peak, anecdotal In terms of the economic landscape, the eurozone of the ‘golden visa’ will be permitted to travel evidence points to rising buyer emerged from its recession in the second quarter within the Schengen area without further visa of 2013 posting growth of 0.3%, but Spain’s requirements for a maximum of 90 days every interest as prices hit new lows economy is still contracting, falling by 0.1% in six months. For wealthy buyers from outside the There are more buyers making the year to June. Unemployment at 26.3% is the EU Spain’s golden visa is expected to generate more offers at the asking price than second highest in the EU after Greece but there significant interest. is some optimism. 12 months ago Spain’s new homes market stalled post the credit Spain’s “bad bank” Sareb which was established crunch and activity is unlikely to pick up until the as a condition of the EU bailout, has agreed excess number of new homes (mostly priced below its first sale of 343 homes to a Miami–based €300,000) are absorbed. Barcelona and Madrid private equity firm. The IMF also reports that have seen stronger levels of new development, strong reform is helping to stabilise the particularly at the high end. economy and external and fiscal imbalances Having observed price falls for seven consecutive are correcting rapidly. years, an increasing number of buyers are Spain’s prime market has seen stronger activity convinced luxury prices have reached their floor. in 2013 but Spain’s mainstream market remains In some locations prime prices are 40% below at a slower pace as credit conditions remain their pre-crisis peak and buyers are making serious tight. At present foreign buyers have the offers, closer to the asking price than they were 12 competitive edge given they are able to access months ago with more transactions being achieved. FIGURE 1 FIGURE 2 Time to buy? Prime price change in second Mainstream residential property price index: home hotspots Spain v Europe 2011-2013 130 15% 2011 Sovereign 120 debt crisis 10% 2012 2013 5% 110 0% KATE EVERETT-ALLEN 0% International Residential Research 100 -5% 90 “ The recent law granting Q1 2006 Indexed -10% Lehman Brothers Spanish residency to non- 80 collapses -15% EU buyers purchasing a rc 70 Ibiza homes above €500,000 200820072006 2009 2010 2011 2012 2013 Madrid Mallo Marbella is expected to generate SPAIN EUROPE Barcelona Sotogrande significant interest.” Source: Knight Frank Residential Research, INE, Spanish Ministry of Development Source: Knight Frank Residential Research 2 SPANISH PRIME RESIDENTIAL INSIGHT SEPTEMBER 2013 1. Madrid 2. Barcelona 3. Mallorca The Madrid residential market has, until Knight Frank’s Associate office in Barcelona Buyers are seeing value again in Mallorca. Prices recently, had limited exposure to international recorded more sales in the first half of 2013 have declined in the last five years but the buyers with Spanish purchasers accounting than in the whole of 2012. This increase has island has proved better insulated than parts for nearly all sales above €2m. In the last five been almost entirely driven by international of mainland Spain. This is due to strict building years buyers from the US, Mexico, Colombia, buyers. Russian and French buyers are the restrictions, a limited supply of homes, many Venezuela, Russia and China have increased. most active but demand from Swiss buyers with a high degree of privacy and an increasing Around 65% of enquiries relate to properties has strengthened since early 2012. The number of flights from major European cities. priced between €1m and €3m and most are remainder of the market is comprised of a The recovery is evident across most price bands located inside the M30 in areas such as Salamanca, mix of northern Europeans (including British but particularly below €600,000 and above €2m. El Viso, Castellana and Jerónimos. and Scandinavians), Chinese, Middle Eastern Areas performing strongly include the island’s and US purchasers. For a capital city, Madrid is relatively small meaning main prime locations; from Pollensa to Formentor its prime residential housing stock is limited, which Central Barcelona, Eixample, Barceloneta and in the north, from Santa Maria del Cami to Alaro in turn means prices have not fallen as much as in Diagonal Mar remain the most popular markets. in the centre, and between Andratx and Bendinat other parts of Spain. More peripheral areas such as Enquiries are strongest within the €500,000 to on the south western tip. Penthouses in Palma are La Moraleja, La Finca, Puerta de Hierro, Mirasierra €1.5m price bracket. also popular with international buyers. and Conde Orgaz are expected to emerge as key We anticipate that the market will continue The mountainous enclave of Deia remains one of prime markets in the next 5-10 years. to improve in the next 2 to 3 years but it will the most desirable locations for wealthy buyers. Luxury prices fell by c.11% in the year to June be a few more years before local buyers start Here, 80% of buyers are British, with the remainder but are expected to stabilise in 2013-14 as returning to the market. being primarily German or Scandinavian. demand strengthens. PORTUGAL 1 MADRID BARCELONA 2 SPAIN Valencia Balearic Islands 3 Alicante 4 MALM LORCA MARBELLA IBIZA 5 6 Malaga SOTOGRANDE 4. Ibiza 5. Marbella 6. Sotogrande The island remains firmly on the radar of Properties priced between €200,000 and Prices in Sotogrande hit a low in early 2012, wealthy second home buyers and demand €1.4m are attracting the most enquiries in enquiries and sale volumes have increased has strengthened in 2013. Prime prices have Marbella. Most international buyers are slightly since. Sotogrande is a second-home remained relatively firm compared to parts of seeking a home either along the Golden location that has long been favoured by mainland Spain and the strength of the Euro Mile that runs between Marbella Old Town Madrid’s wealthy and Gibraltar’s business against sterling has helped attract demand to and Puerto Banus, or in the golf valley – community. It has seen the number of Spanish date in 2013. Nueva Andalucia. Beachfront homes and buyers decline in recent years, but they have Top nationalities buying at present are English, gated communities such as La Zagaleta, El been replaced instead by Scandinavian and Dutch and Belgian, the key difference to five years Madronal and Guadalmina Baja also attract Benelux buyers. ago is the strong presence of Dutch buyers. This is a premium. International buyers favour the areas of Sotogrande reflected in the latest tourist numbers, with Dutch The latest data suggests an improving market Costa and the Kings and Queens area, or established tourists up by 37% in 2013 year-on-year. in Marbella. Sales in 2012 increased 21.1% areas with large plots and panoramic sea views, in The €3-€5m price bracket generates the most year-on-year. Russian buyers have been more particular the area in relation to Almenara Golf Course. interest with the capital Eivissa (Ibiza Town) and active in the last 12 months while Benelux and Enquiry levels are strongest for two bedroom the area surrounding Santa Gertrudis which is Scandinavian purchasers continue to have a apartments, particularly those around the marina home to the top English-language school proving strong presence. Interest from French buyers priced between €250,000 and €450,000. Sales popular.