NEXT year could be a good time to buy a property in Spain and have some cash left over in your budget – predictions are that 2021 will bring a reduction in prices of around 7%, rising to 10% in large cities such as Valencia, Málaga, Sevilla, Barcelona and Madrid.
Sellers may want to hang onto their properties for a bit longer as a result, unless they are planning to move to another area or have decided to find somewhere smaller and cheaper if their line of work is in a business that has been badly affected by the pandemic – as a result, a reduction in national demand is likely to see supply increase and prices fall.
“Even though public spending is helping to contain business closures and redundancies [the extension of the furlough scheme is part of this strategy], these efforts are currently proving insufficient to recover levels of economic activity seen prior to the health crisis in Spain, and we'll take around another two or three years to get back to those while restrictions and confinements continue and a large part of the population will not have been vaccinated yet,” says property market analyst Ferran Font.
The European Commission, despite forecasting 2020 will end with Spain's GDP having shrunk by 12.4%, does not expect this to be a long-term situation: Next year, it will grow by 5.4% and in 2022, by a further 4.8%; based upon the assumption that Europe's estimations will be, necessarily, conservative, it seems likely Spain will be back to normal economic health by 2023 at the latest and will be gradually improving on its present circumstances starting from a few weeks' time.
The rent market has been shrinking in the largest cities, according to Font, including the five mentioned above, but the monthly costs for tenants in Spain's biggest metropolitan areas have, arguably, been too high for the last few years, meaning anyone who is able to undercut average prices in these areas should not have difficulties in finding paying occupants.
Font does not expect the GDP for 2020 to have fallen quite as drastically as the European Commission says, since he believes some of the reduction will spill over into 2021 and it will begin to grow again as more and more of the population is immunised against the SARS-CoV-2 virus.
He expects the full year of 2020 to have seen house prices fall by around 2%, and for 2021, they will drop by between 5% and 7%.
But new builds and 'second-hand properties of excellent quality and in sought-after areas' will be more likely to hang onto their value, Font believes, and home values overall could begin to recover to pre-2020 levels by the end of 2022.
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