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Everything you need to know is included in our Spain Property Pack
Are you thinking of investing in property in the land of Flamenco? Are you wondering whether you should make a purchase now or in the future?
People have different understandings of market timing. The Spanish real estate agent you know might advise you that now is the opportune time to buy property, while your childhood friend from Madrid may suggest exercising more patience before making a decision.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Spain, we facts and data that are backed by evidence, not just opinions or rumors.
We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Spain.
We hope you find this helpful!
How is the property market in Spain currently?
Spain offers, today, a lot of stability to investors
Positive
If you want to invest in real estate, prioritize stability as it promotes property ownership, rental demand, and sustainable growth. It is an information you need as a foreigner looking to buy a property in Spain.
You probably know it already, Spain is very stable. The last Fragile State Index reported for this country is 44.4, which is an outstanding number.
Spain has a strong and diversified economy, and its government has implemented a series of reforms that have stabilized the country and made it an attractive destination for foreign investors. Additionally, the country enjoys a favorable business environment with a well-developed infrastructure and a competitive labor market.
Next, let's assess the economic projections.
Spain is positioned for growth in the coming years
Positive
Before investing in Real Estate, look at the performance of the country's economy.
According to the IMF, Spain will end 2023 with a growth rate of 1.5%, which is promising. For 2024, the figure we're looking at is 2%.
This steady growth might keep going since Spain's economy is expected to increase by 8.4% during the next 5 years, resulting in an average GDP growth rate of 1.7%.
A moderate growth rate in Spain is positive for potential property investors, as it means that the market is not overheated and there is still potential for property values to increase over time. Additionally, a moderate growth rate indicates that the market is stable and not subject to sudden changes, providing more security for investors.
That being said, there are other indicators to monitor.
Spanish business owners still don't express confidence in current market conditions
Negative
Although the GDP forecast provides insights, it may not fully capture the local Spanish sentiment as it relies on external projections. Luckily, in Spain there is an established metric that is routinely disclosed. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a metric that quantifies the confidence of business leaders in the economic conditions of the present and future. It's determined through surveys and assessments.
According to the Ministerio de Industria, Energia Y Turismo's data, the latest Business Confidence Index value is 4 for Spain. For interpretation, it's quite low.
Unfortunately, we're on a descending trend. The score, 12 months ago, was at 8.
Business Confidence is not at its best in Spain. However, this does not mean the property market will crash. A low score often indicates a temporary period of uncertainty or caution in the business sector, which is a natural part of economic cycles.
Therefore, it's important to consider other metrics before deciding whether it's the right time to buy property in Spain. Let's do it now.
Spanish house prices on a steady growth path
Positive
Spain's home prices have increased by 14.2% in 5 years according to Ministerio de Fomento.
It means that if you had bought a villa in Marbella for $750,000 five years ago, then it would now be worth around $856,000.
Recently, Spanish house prices have been growing slowly but surely
It's a positive signal and promising sign for those seeking a secure investment environment.
You can find a more detailed analysis of the real estate prices in our property pack for Spain.
Everything you need to know is included in our Spain Property Pack
Spain's population is declining and getting poorer
Negative
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Spain, the average GDP per capita has changed by -1.1% over the last 5 years. It's a bit concerning.
Rental yields are average in Spain
Neutral
We will now consider the rental yields in detail.
It's the annual rental income of a property divided by its price. For example, if a Spanish property is purchased for €300,000 and generates €15,000 in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Spain offer gross rental yields ranging from 3.4% and 6.1%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Spain.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Spain Property Pack
In Spain, inflation is expected to be moderate
Neutral
To simplify, inflation is when prices rise, and things become more expensive.
It's when your favorite plate of paella in Barcelona costs 18 euros instead of 15 euros a couple of years ago.
If you're contemplating investing in a property, high inflation can bring you several benefits:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby boosting cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
In accordance with IMF projections, over the next 5 years, Spain will have an inflation rate of 12.0%, which gives us an average yearly increase of 2.4%.
It means that Spain may face inflation in the near future. In such a situation, buying property now becomes an option to consider.
Is it a good time to buy real estate in Spain then?
Let's wrap things up!
Looking ahead to 2024, investing in property in Spain holds strong potential, supported by a range of compelling indicators. The country's remarkable stability provides a secure foundation for investors, fostering a positive environment for real estate transactions and reducing risk.
Spain's projected growth in the upcoming years adds to its attractiveness as a property market. This anticipated expansion suggests potential for property values to appreciate, offering investors the possibility of capital gains over time.
The steady growth trajectory of Spanish house prices underscores the reliability of the real estate market. This consistent upward trend signifies the potential for sustained value appreciation, contributing to the appeal of property investment in the country.
While neutral signals such as average rental yields and moderate inflation should be noted, the overall favorable and neutral indicators, along with Spain's stability and growth potential, counterbalance the negative signals, making 2024 a promising time for property investment in Spain. Investors should carefully weigh these factors in line with their investment goals to make informed decisions.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in Spain.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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