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Last Updated: Jul 20, 2016




After almost seven years of falling house prices, Spainís housing market is recovering. Spanish house prices increased 0.83% during the year to end-Q2 2016 (2.07% inflation-adjusted), its third consecutive quarter of y-o-y house price rises, based on figures from†TINSA. The housing market finally returned to growth in Q4 2015.† However quarter-on-quarter, house prices fell by 0.41% (-1.73% inflation-adjusted) during the latest quarter.

The†Bank of Spain reports even stronger house price rises. During the year to end-Q1 2016, Spanish house prices rose by 6.34% (7.05% inflation-adjusted).†On a quarterly basis, house prices increased 1.45% (3.58% inflation-adjusted) in Q1 2016.

Spanish house prices fell by a total of 41.4% (46.8% inflation-adjusted) from Q4 2007 to Q3 2015, based on figures from TINSA. There were 30 consecutive quarters of y-o-y declines:
  • In 2008, Spanish house prices fell 7.71% (-9.86% inflation-adjusted)
  • In 2009, house prices fell 6.88% (-7.07% inflation-adjusted)
  • In 2010, house prices fell 4.03% (-6.4% inflation-adjusted)
  • In 2011, house prices fell 7.64% (-10.11% inflation-adjusted)
  • In 2012, house prices fell 12.05% (-14.67% inflation-adjusted)
  • In 2013, house prices fell 8.31% (-8.48% inflation-adjusted)
  • In 2014, house prices fell 4.45% (-3.92% inflation-adjusted)
  • In 2015, house prices rose by a meagre 0.25% (0.53% inflation-adjusted)

In 2015, the total number of home sales in Spain increased 11% to 354,513 units from the previous year, according to the†Instituto Nacional de Estadistica†(INE). †This rise in transactions was mainly driven by foreigners buying homes on the coast and in cities like Barcelona and on the Costa del Sol, one of the countryís most popular areas with overseas purchasers.

Britons remain the number one foreign homebuyers in Spain, making about 21% of all home purchases by foreigners in 2015, followed by the French, Germans, and Swedish buyers, each accounted for about 6% to 7%.

Foreclosures stood at 11,278 dwellings in Q1 2016, down by 14.7% from the previous quarter and down by 36.7% from the same period last year, based on figures from the INE.

Spanish house prices will increase by around 5% this year, according to a forecast by Moodyís credit rating agency.

Spain houses for sale In the first quarter of 2016, the Spanish economy advanced 0.8% from the previous quarter, the same as in the previous two quarters, despite political uncertainty after inconclusive general elections in December last year - the 11th consecutive quarter of growth. The economy is expected to grow by 2.6% this year and by another 2.5% in 2017, after growth of 3.2% in 2015 and 1.4% in 2014, and contractions of 1.7% in 2013, 2.6% in 2012 and 1% in 2011, according to the European Commission.

Analysis of Spain Residential Property Market »


RENTAL YIELDS
Last Updated: Jul 09, 2016



Gross rental yields on property in Spain continue to recover. In some places in Spain, but only for the smallest sized apartments, buying an apartment is now attractive from a yields perspective, which is a completely new situation for Spain.

Prices of apartments. Prices per square metre (sq. m.) of apartments in Barcelona range from around EUR 4,400 to EUR 5,000. In the heart of Madrid, i.e., ChamartŪn, ChamberŪ, Retiro and Salamanca, prices per sq. m. range from around EUR 4,300 to EUR 4,700. In nearby upscale suburbs of Madrid such as Las Rozas, Majadahonda and Pozuelo de Alarcůn, apartments are cheaper, with prices per sq. m. ranging from around EUR 2,800 to EUR 2,900.

Rents of apartments. Barcelona fetches the highest rents per sq. m. Apartments here cost around EUR 14.70 to EUR 20,25 per sq. m. to rent per month or the equivalent monthly rental income of around EUR 1,700 for a 120-sq. m. apartment.

Apartments in central Madrid cost around EUR 15.50 to EUR 17 per sq. m. to rent per month or the equivalent monthly rental income of around EUR 1,850 for a 120-sq.m. apartment.

For apartments in suburban Madrid, rents per sq. m. per month range from around EUR 9.60 to EUR 12 or the equivalent monthly rental income of around EUR 1,150 for a 120-sq. m. apartment.

Rental returns. The gross rental yield for apartments in Barcelona ranges from 3.90% to 5.00%, and in the centre of Madrid, rental yields are similar, ranging from 3.90% to 4.70%. In Madrid-suburbs, rental yields range from 4.15% to 5.25%.

Conclusion: All these yields figures are better than last year, which was better than the previous year. Spain is once again beginning to look a possible investment destination.

When buying property, take into consideration that round-trip transaction costs are moderate to high in Spain.† See our Property transaction costs analysis in Spain and Residential property transaction costs in Spain, compared to the rest of Europe.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Jul 13, 2016



Rental Income: All property owners are subject to a flat tax of 19% on gross rental income.

Property and Wealth: A special annual 3% tax is levied on the cadastral value of real estate owned by nonresidents.

Capital Gains: Capital gains tax realized by nonresidents are subject to flat rate of 19%.

Inheritance: Each beneficiaryís inheritance is taxed at progressive rates, from 7.65% to 34%, after certain tax-free amounts have been deducted.

Residents: Resident individuals are liable to tax on their worldwide income and assets at progressive rates, from 19% to 45% for 2012 and 2013.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Jul 14, 2016



Spain luxury houses for saleThe total roundtrip transaction cost is around 9.50% to 15%. This includes the Property Transfer Tax, which varies from 6% to 10% depending on the autonomous region, and the real estate agentís commission, which is around 2.5% to 3%.

For new properties, Value Added Tax, plus stamp duty, is imposed instead of property transfer tax.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: May 25, 2006



Spain properties for saleSpainís rental market is extremely pro-tenant.

Rent Control: The landlord and tenant have the contractual freedom to fix the rent and state the due date of payment. However, rent increases are tied to the Consumer Price Index and limited to once a year.

Tenant Security: The 1994 Urban Tenancy Act aimed to restore balance between the interest of landlords and tenants. It failed. Tenants are guaranteed tenure for five years. Courts are painfully slow in resolving cases of tenant eviction and compensation for rental arrears and damages.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jul 20, 2016


Spanish economy continues to grow

Spain gdp unemploymentSpainís economy started to recover in 2014, with GDP expanding by 1.4%, according to the International Monetary Fund†(IMF). In January 23, 2014, Spain became the second euro zone country to exit its international bailout program, after Ireland. The economy grew by a healthy 3.2% in 2015.

In the first quarter of 2016, the economy advanced 0.8% from the previous quarter, the same as in the previous two quarters, despite political uncertainty after an inconclusive general elections in December last year - the 11th consecutive quarter of growth.

It has been a long, hard slog.† Recession has been Spainís normal condition for years.† The economy shrank by 1.7% in 2013, according to the IMF, by 2.6% in 2012 and by 1% in 2011. In 2010, the economy grew by a meager 0.02%, after a contraction of 3.6% in 2009.

The economy is expected to grow by 2.6% this year and by another 2.5% in 2017, according to the European Commission.

Spainís economy was fuelled by property during the boom decade from 1997 to 2007.† At the height of the housing boom in 2007, housing investment was no less than 7.5% of Spainís GDP, significantly above the OECD average.† The construction industry became a key employer of low-skilled workers. The increase in construction activity helped pull unemployment down from 24% in 1994, to 8.3% in 2007.

With the situation reversed, Spanish unemployment now stands at 21% in Q1 2016, down from 23.8% in Q1 2015 and 25.9% in Q1 2014, according to the INE. Despite this, Spainís unemployment is still the second highest in the OECD, next to Greece. The countryís overall unemployment rate is expected to be 20% at the end of 2016 and to fall further to 18.1% in 2017, according to the European Commission.

In June 2016, consumer prices fell by 0.8% from a year earlier, from annual declines of 1% in May, -1.1% in April, and -0.8% in February and March 2016, according to INE. Annual inflation is expected at 0.1% this year, from -0.6% in 2015, and -0.2% in 2014, according to the European Commission.

Spain narrowed its budget deficit last year to 5.1% of GDP, down from 5.9% in 2014 and 7% in 2013 still higher than the target deficit of 4.2% of GDP. Due to its failure to meet its target, the European Commission has recently proposed to fine it, together with Portugal, in an effort to enforce rules designed to avert another debt crisis. Should the recommendation be approved, fines can reach as high as 0.2% of GDP and a suspension of some regional funds.

The deficit is projected to fall to 3.9% of GDP this year and to 3.1% 0f GDP in 2017.

Spainís gross public debt stood at about 99.2% of GDP in 2015, a slight decline from 99.3% of GDP in 2014. It is expected to increase further to 100.3% of GDP this year, according to the European Commission.







  • Stable & dynamic economy
  • Moderate transaction costs
  • Strongly pro-tenant laws
  • Generally low yields
  • Multiple and high taxes
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €3,442 For a 120 sq. m. property, usually an apartment.
Rental Yield: 3.91% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,345 For a 120 sq. m. property.
Income Tax: 19.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 11.09% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 19.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Strongly Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

Baltics Real Estate Market Overview 2016 - Colliers InternationalPoland Residential Market Q2 2016 REAS
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