Purchases and sales by foreigners have allowed the real estate market to maintain its dynamism in the second half of last year despite the slowdown in the economy (which barely grew 0.1% in the third quarter, according to National Accounts data from the INE ) despite the gradual increase in the cost of financing, as the European Central Bank began to raise official interest rates to 2.5%, the level it had set in December. This boost in operations carried out by foreigners responds to the depreciation that the euro has been registering against the dollar since 2021.
The latest statistics from the College of Registrars found that foreign demand for housing touched 16% of total operations in the third quarter of last year (15.92%), a historic level. At the end of September the euro marked minimums of two decades in relation to the ‘green ticket’ at 0.96 dollars after several months of falls. Since then, and due to the greater rate of tightening of monetary policy by the ECB since its creation, the community currency has recovered a little more than 11% of its value, but it remains well below the 1.22 dollars that it exceeded in 2021.
Sales by foreigners have accumulated six consecutive quarters, increasing their weight over the total and have also grown in absolute terms. This makes them, according to the registrars, a first-rate explanatory factor when it comes to understanding the notable strength of the buying and selling market in an increasingly uncertain environment, marked by the consequences of the war in Ukraine, the energy crisis and a runaway inflation in most Western economies.
From Sociedad de Tasación they add that the euro-dollar parity has led to an increase in operations by Americans and Latin Americans, who have taken advantage of the exchange rate in their favor to acquire a home in Spain (since the euro has lost value, the investment that they have to do in dollars to carry out the operation is less). The latest statistics published by the General Council of Notaries pointed to an increase of more than 75% in home purchases by Americans in the first half of last year alone.
They were, in fact, the second nationality that paid the most per square meter (2,837 euros) just behind the Danes (2,870 euros). The growing importance of foreign investment in housing is clearly appreciated when comparing the data for 2022 with that of the previous year, as pointed out by the Sonneil real estate company. In the third quarter, 74% more houses were sold to non-national customers in Alicante than in the same period of the previous year. In Valencia, year-on-year growth was 60% and Malaga also stood out, with 51% more sales to foreigners.
Less price volatility
Looking at the current financial year, housing will remain a safe haven against inflation, which could close the year at an average of 4.9% according to the Bank of Spain forecast. “These properties, together with replacement and foreign homes, will be the ones that sustain the market in the coming months,” they point out from Solvia, a real estate agency of the Intrum Group. The English residential market registers lower price volatility in housing for sale and rent than in other world economies. The price of new and used housing increased by 3% on average in 2022, according to the Appraisal Society, compared to 7% growth in the European Union collected by Eurostat, the community statistics office, and an 11% increase in the United States. States (according to Zillow, a firm specializing in real estate).
This in a year in which house prices will decrease in most of the countries in the region during 2023 and will maintain that decrease also in 2024. Sylvain Broyer, Chief Economist for EMEA at S&P Global Ratings in the report ‘European Housing Prices : A gradual and sticky decline’. The rating agency contemplates that housing will become cheaper in Spain by 2.5% on average this year and 1% the next, becoming more expensive by 1.5% already in 2025.