In late May, the Bank of Spain revised its forecast for the impact of the coronavirus outbreak on the country’s economy, predicting a 12.4 percent GDP drop and an unemployment rate of 20 percent by the end of 2020, worse figures than initially expected.
This dire outlook has had a silver lining for budding houseowners who haven’t seen their livelihoods affected by the Covid-19 crisis – an almost inevitable drop in property prices according to think thanks and a number of financial entities.
Colliers International Spain, part of a global real estate services firm, expects a “short-term drop of 5 to 10 percent” in property prices.
Spanish Savings Banks Association Funcas believes the decrease will be even more pronounced- 10 to 20 percent – whereas international real estate company RE/MAX has estimated an even bigger fall in Spanish house prices – up to 30 percent in some areas.
Others such as the BBVA Foundation have argued that prospective homeowners shouldn’t expect a price drop as pronounced as that of the 2008 financial crisis as the cost per square metre value wasn’t as overinflated at the start of 2020 as it was back then.
According to several other financial entities, new builds are not expected to feel the crunch as much as second-hand properties.
“It’s obvious that the demand for housing will decrease in line with the economic recession, unemployment and the uncertainty regarding how health and economic situation evolve in the near future,” José Luis Álvarez Arce, professor of Economics at the University of Navarra (UNAV) is quoted as saying in Spanish property portal Idealista.
With so many opinions and forecasts from official bodies and experts, it can seem slightly overwhelming and difficult to draw accurate conclusions about where Spain’s property market will be at the end of 2020 or in 2021.
These are after all estimates in the midst of a global crisis which is largely uncharted and unpredictable territory for us all, but property professionals appear to agree on where price drops will be more pronounced.
Where in Spain are property prices expected to fall the most?
According to Colliers International, second-hand homes in popular tourist hotspots such as Palma in Mallorca, Alicante, Barcelona, Valencia or the Canary Islands could see a price drop of 10 percent by the end of the year.
Álvarez Arce agrees that Spain’s hard-hit tourism industry will play a crucial role in determining where prices tumble the most, as does Spain’s association of housing developers APCE, who argue that “the areas where unemployment is highest and business growth has stagnated” will see considerable drops, at least until their economy recovers.
Property site Idealista has reached the same conclusion: Spain’s Costa del Sol, the Valencia region and the Canary and Balearic Islands are all property markets which are highly dependent on foreign demand and are likely to be hit hard.
In Madrid, prices are also forecast to drop, especially in neighbourhoods in the south of the capital such as Puente de Vallecas, Usera and Villaverde (- 6-8 percent forecast drop).
Barcelona is expected to see more pronounced property price falls throughout the city, even in central neighbourhoods such as Eixample and Gràcia (- 5 percent).
And it isn’t just property markets in big cities and popular tourist spots on the coast that are expected to be affected.
“Areas that don’t have large cities close by, where there isn’t much of a second-home market and where there was little activity prior to the Covid-19 crisis” will also find it more difficult in the long run, housing developers APCE explained.
The overall consensus is that these pronounced property price reductions are not yet a reality but that everything points to considerable changes taking place by the time 2021 comes along.
“We’ve seen slight price drops in approximately 25 percent of the ads on real estate websites since Spain’s state of emergency was declared and the lockdown began,” Juan Fernández-Aceytuno, CEO of Spain’s Appraisal Society, told El Economista.