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Last Updated: May 18, 2017




Spanish house prices increased 2.67% during the year to end-Q1 2017 (0.38% inflation-adjusted) to €1,385 per square metre (sq. m), the fifth consecutive quarter of y-o-y house price rises, according to TINSA. Quarter-on-quarter, house prices rose by 3.2% (4.1% inflation-adjusted) during the latest quarter.

Spain's housing market finally returned to growth in Q1 2016. Spanish house prices had fallen by a total of 41.9% (46.8% inflation-adjusted) from Q4 2007 to Q3 2015, based on figures from TINSA. There were 31 consecutive quarters of y-o-y declines:
  • In 2008, Spanish house prices fell 8.75% (-10.05% inflation-adjusted)
  • In 2009, house prices fell 6.57% (-7.23% inflation-adjusted)
  • In 2010, house prices fell 3.85% (-6.67% inflation-adjusted)
  • In 2011, house prices fell 8.17% (-10.28% inflation-adjusted)
  • In 2012, house prices fell 11.34% (-13.82% inflation-adjusted)
  • In 2013, house prices fell 9.19% (-9.44% inflation-adjusted)
  • In 2014, house prices fell 2.96% (-1.96% inflation-adjusted)
  • In 2015, house prices fell 1.71% (-1.71% inflation-adjusted)
  • In 2016, house prices increased slightly by 1.67% (0.1% inflation-adjusted)

Demand is now rising strongly. In 2016, the total number of home sales in Spain increased 14% to 457,689 units from the previous year, according to the InstitutoNacional 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 country’s most popular areas with overseas purchasers. Most foreign homebuyers are Britons, French, Germans, Belgians, Italians and Swedes.

Foreclosures fell by 31.3% to 41,129 dwellings in 2016 from a year earlier, based on figures from the INE. Foreclosures dropped 33.6% for new dwellings and by 30.9% for existing dwellings.

The outlook for Spain’s housing market is now upbeat, with house sales expected to rise by between 10% and 15% to reach about 520,000 to 545,000 transactions this year, according to TINSA.

“We believe that a growing economy, low financing costs, good potential for rental returns and capital appreciation will continue to drive sales throughout 2017 and beyond,” said Lucas Fox International Properties.

Nationwide house prices are also projected to increase by about 2% in 2017. More specifically, house prices are expected to rise by 7% in Barcelona and by 4% in Madrid, according to housing market analyst Borja Mateo.

Spain houses for sale “The price recovery now taking place in Madrid, Barcelona, and certain tourist zones of the coast will extend to the suburbs and other parts of the country,” forecasts Beatriz Toribio of real estate portalFotocasa.

In the first quarter of 2017, the economy advanced 0.8% from the previous quarter, the same as in the same period last year, making it as one of the fastest-growing economies in the European Union. On an annual basis, Spain’s GDP expanded by 3% in Q1 2017. The economy is expected to grow by 2.8% this year, after growth of 3.2% in 2015 and 2016, and 1.4% in 2014, and contractions of 1.7% in 2013, 2.6% in 2012 and 1% in 2011, according to the Bank of Spain.

Analysis of Spain Residential Property Market »


RENTAL YIELDS
Last Updated: Jul 14, 2017



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., Chamartín, Chamberí, 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 Alarcón, 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 beneficiary’s 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 agent’s 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 saleSpain’s 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: May 18, 2017


Spain’s economic fundamentals improving

Spain gdp unemploymentSpain’s 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 both 2015 and 2016, mainly due to an increase in consumption on the back of falling unemployment, strong exports and a thriving tourism sector.

In the first quarter of 2017, the economy advanced 0.8% from the previous quarter, the same as in the same period last year, making it as one of the fastest-growing economy in the European Union. It was Spain’s 14th consecutive quarter of growth since it emerged from a grueling five-year financial crisis in late 2013. In an annual basis, Spain’s GDP expanded by 3% in Q1 2017.

It has been a long, hard slog.  Recession has been Spain’s 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.

Bank of Spain expects the Spanish economy to expand by 2.8% this year, up from its previous estimate of 2.5% growth.

Spain gdp inflationSpain’s 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 Spain’s 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 18.75% in Q1 2017, down from 21% in Q1 2016, 23.8% in Q1 2015 and 25.9% in Q1 2014, according to the INE. Despite this, Spain’s unemployment is still the second highest in the OECD, next to Greece. The country’s overall unemployment rate is expected to be 17.7% at the end of 2016 and to fall further to 16.6% in 2018, according to the IMF.

“The figures have not improved miraculously: thanks to reforms, the economy is turning the corner away from the crisis; unemployment, while still very high, has fallen. And we expect it to continue falling,” said IMF managing director Christine Lagarde.

In March 2017, consumer prices increased 2.1% from a year earlier, down from 3% in the previous month but up from an annual decline of 0.8% in March 2016, according to INE. Annual inflation is expected at 1.9% this year, from -0.3% in 2016, -0.6% in 2015, and -0.2% in 2014, according to the European Commission.

Spain narrowed its budget deficit to 4.7% of GDP in 2016, down from 5.1% in 2015, 5.9% in 2014 and 7% in 2013. The government aims to reduce the deficit further to 3.1% of GDP this year to meet the target set by the European Union.

Spain’s gross public debt stood at about 99.7% of GDP in 2016, from 99.8% of GDP in 2015 and 99.3% of GDP in 2014. It is expected to increase slightly to 100% 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): €4,409 For a 120 sq. m. property, usually an apartment.
Rental Yield: 4.21% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,856 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.

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