Just when everyone thought that things were about to look rosy in Spain this 2016, the general election results of December 20, 2015 has sort of thrown a spanner in the works. If you’re looking to sell property in Spain fast, you would probably be confused by the new political instability in the country and what it means for you.
Let’s first look at 2015 and what a great year it was for homeowners in Spain. The National Statistics Institute (INE) reveals that house prices in Spain ended 2015 4.5% from what they were at the end of 2014. That’s the biggest annual percentage increase that we have had in Spain since 2007 – which is impressive.
Real estate experts predicted (or did, before December 20, 2015) that 2016 would be a fabulous year for the real estate market in Spain, with a massive rise in house prices in all major cities, such as Madrid, Malaga, Barcelona, Valencia and Alicante. There have been suggestions that the rise in home prices in 2016 could be anything from 6% to an incredible 12%. That would be amazing, if it turns out to be true.
Now, because of the huge interest in Spanish property from foreign buyers, the real estate sector in the country will always do well. But the fact is the local population has been declining steadily and there has been a slow erosion of local demand for new residential properties in Spain. This can have an effect on the Spanish residential property market in 2 to 3 years. Even so, we expect property prices to rise in the near term.
Real estate experts are of the opinion that this is the right time to invest in Spanish property because of a confluence of several factors, such as low interest rates, excellent returns on investment and the expectation of a better job forecast in 2016.
Spain’s biggest bank, BBVA anticipates a rise in the number of property purchases and new construction in 2016. The bank believes that revenue from the sector will contribute significantly to Spain’s GDP, even more so than in the past. BBVA has based its forecast on the expectation of a renewed demand for residential property in Spain.
Okay, this is where all the predictions made by real estate experts may well turn out to be shortsighted, because the events of December 20, 2015 – when the general election results were announced - have basically put the Spanish economy in a limbo.
Of the 4 political parties, three have captured around 20% of the votes each, while the fourth has got 14%! Nobody really knows who’s going to form the government in Spain as each of the four political parties has staked a claim.
This may be a lot of fun for journalists as they get to sell more newspapers, but it is a catastrophe for the real estate sector in Spain as well as the larger economy and puts the country’s economic recovery in doubt. The last thing any investor needs in a country is political instability.
Things could get even worse if it turns out that households have less disposable income and the job situation refuses to improve. Any drop in consumer confidence would cause foreign investors to stay away.
These is a major risk of the province of Catalonia (of which Barcelona is a part of) breaking away from Spain. There’s a new government in Catalonia, which came to power by promising independence to the province.
Will Catalonia break away? Nothing is certain yet, but if it does, it certainly wouldn't’t be great news for foreign investors looking to put their money in Spain.