MY 10 PREDICTIONS. WHAT CAN YOU EXPECT FOR 2019?

  1. The real estate market continues to be in an expansive cycle and will offer attractive opportunities in 2019. The number of purchase transactions and the property prices will continue a growth path overall. However the market will evolve very heterogeneously across the country and a one-approach-fits-all strategy doesn´t exist. The very centres Madrid and Barcelona will show reduced growth, tier-2 cities will fuel the market (e.g. Alicante, Gerona, Malaga, Zaragoza,…), and the Costas will grow at a rather slow but steady pace.  
  2. Investing your savings in the right area will give you double digit (10-15%) returns in the next years. Investors will need to adjust their strategies more than ever and will have to go outside their comfort zone and take expert advice to materialise the new opportunities. If you leverage the bank to finance your purchase, your returns will even be higher and 15-20% is not unrealistic.
  3. People who rent, will be able to buy their own property and have a monthly mortgage payback that is equal to and possible lower than what they have been paying as monthly rent. Without a need for large upfront down payments. Hundreds of thousands (and possibly up to 1 million) Spanish households are expected to switch from renting to buying in the next 3-4 years. This generates demand in areas that today still have not picked up much, and specifically close to those cities with strong economic activities/employment. This trend is expected to be a key driver for overall housing market growth across Spain. At the same time, a lot of rental properties will become free and this might in some areas cause downward pressure on the rental prices.
  4. Rental prices have gone up strongly in the last years and will likely normalise, stabilise in the next years and probably slightly decrease in some of the hot areas. Again here, in markets where foreigners / expats love to buy, this effect might be different due to their willingness to pay a premium for location.
  5. Brexit continues to make U.K. (potential) buyers worry. Nobody can predict what the impact will be, but what is clear that, independent from the outcome of the Brexit, it generates uncertainly. And in uncertain times, people get interested properties above any other type of investment. We receive more questions than ever before from U.K. buyers that are preparing their scenarios. The U.K. buyers are still the largest nationality buying in Spain with on average 192 property acquisitions every week.
  6. The political tension between Spain and Catalonia did initially create worries with investors. However investors look at returns, probabilities and risks, and they see that the probabilities for a bad outcome are very low. And second home or expat buyers tend to care more about the lifestyle, and that won´t change by political debates.
  7. The government (national and regional) is evaluating options to “control” the market. However, these measures seem to be rather based on simple populist electoral talking, and clearly lack a sound economic foundation. I see it very likely that these measures will produce the opposite effect: higher rental prices and higher buying prices in the areas where the government would exactly like to achieve the opposite.
  8. Proptech: there is a lot of buzz about this. I see significant overpromises, and think many of today´s proptech initiatives will disappear, while many new ideas will be launched. Adding services to pure technology is in my view a critical way to create differentiated value and to convince customers to pay. I do believe strongly in big data applications (we have tested many and are using the best!) to support taking better purchase or sale decisions. They add clear value and generate insights that one simply cannot attain without combining tons of data.
  9. Mortgage conditions will change. The good news is that the European Central Bank has decided to keep interest rates low for the rest of the year, but banks will try to compensate their additional costs imposed from recent regulatory changes with incremental charges to buyers. Watch out for new hidden costs; competition between banks is fierce. We have seen creative and totally unacceptable and shameless practices from some of the largest Spanish banks with regards to trying to charge buyers hidden costs.
  10. Second homes in the coastal areas will remain very attractively priced. Prices have not seen considerable recovery yet (except for some very specific areas) and great opportunities exist. Prices as well as the type of buyers and tourists vary strongly between regions and villages, so don´t just look at the price!

 CONCLUSIONS:

  • 2019 offers opportunities that won´t last forever.
  • Define your goals and then develop the best strategy. The property market will evolve very heterogeneously across the country. There is no one-strategy-fits-all for Spain.
  • If you plan to buy home (first or second residence), be mindful of the market changes. Your reference points from the past might no longer be a good compass.
  • Investing your savings in the right area can give you double-digit returns in the next years. Don´t buy where you would have bought two years ago.
  • If you buy, think financially smart and leverage the bank. There are more options than you might think.

 

A VISION FOR A BETTER FUTURE

Our mission is to make the real estate sector more transparent and provide buyers with everything they need to make a smart investment decision and ensure an optimal purchase process. We firmly believe that buying in Spain can be a complex journey through a minefield and requires expert navigations skills to complete a purchase unscathed, specifically for international buyers. This can be done better, and that´s what we do: truly help buyers & investors.

 

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