The Spanish educational system
At present, the differing educational systems of the European Union are trying to direct their efforts so that there are fewer differences between countries.
Review of real estate market in Spain in 2019 and outlook 2020
It's now more than a decade since the credit crunch plunged Spain into crisis. The economy has now recovered to the extent that S&P has raised the credit rating from BBB+ in 2012 to A now. Banks are no longer imperilled by bad loans, and the government has managed to cut the fiscal deficit. The property market has stabilised, and prices have risen, though residential property prices are still more than a third lower than at the 2007 peak.
The Spanish economy is now growing by just over 2% a year, though it's gradually slowing. That sets the scene for a stable property market, with demand particularly strong in the big cities, like Barcelona and Madrid.
One concern, though, is that there's still a large inventory of unsold property - 459,987 homes at the end of 2018. This figure has been falling since 2009, but it's just being nibbled away. However, many areas of Spain are undersupplied with new property - the problem with this inventory is that most of it isn't anywhere people want to buy.
Statistics from the INE (Instituto Nacional de Estadistica) show transaction volumes falling over the summer. That may be due to the new mortgage law, which held up sales in June and July as notaries in particular struggled to comply with the new rules.
The INE data shows all property transfers, which were down 3.7% year on year in September. But that includes a big slug of inheritances, as well as foreclosures, consolidation and division of land holdings, and other technical types of transfer. Digging down a bit to look just at sales, the Q3 figures show a 6.95% fall in the number of transactions. That interrupts a gradual upwards trend since 2013.
Let's have a closer look at the statistics from regions below.
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The stats look very different across the country. Sales were up in Aragon and Murcia by about 3%, while in Asturias, Navarre and Castilla y Leon they were down by more than 20%. Andalucia, one of the key areas for foreign buyers, was down by 14%, though the Catalan market was more stable with only a 5% decline, the same level as Castilla La Mancha.
Figures from the land registrars show new home sales falling 20%, while resales were more resilient with only a 9% fall in volume. Is this a blip - or the beginning of a downwards trend? Only time will tell. One thing we can tell right now, we don't observe any bubble right now, it might be the stabilization process.
Though volumes have seen a setback, prices are still rising. Property prices were up 4.7% year on year in the third quarter of 2019, with new properties 6.6% ahead and resales up 4.4%.
But price growth is decelerating from 7% in 2018, and that's been a fairly consistent trend since Q3 2018. Madrid, Murcia and La Rioja have seen particularly significant slow-downs (Madrid from 6.5% to 4.6%), though no area of the country is seeing prices fall.
Where is still growing fast? The Basque Country is growing at 4.8% and the market there is actually accelerating; the Balearic islands are also seeing prices increase by 6%. And Andalucia - even though transaction volume is down - is maintaining high price growth at 5.9%, just up from 5.8% in the second quarter.
So, while price growth in most areas is slowing, there's no sign of the market stalling. With prices still below 2007 levels, and the economy continuing to show growth, there's no reason to expect that prices will go into reverse - but be careful of areas like Madrid which may be overvalued.
It's intriguing to see that the number of mortgage approvals appears to have been flatlining since 2015 despite the market recovery. In September 2019 the number of mortgages approved fell nearly a third year-on-year - but the total value of new loans rose by 5.3%.
However, for those securing mortgages, the good news is that average rate paid is still falling. Borrowers in 2018 would have got an average 2.63% rate on their loans - this year, they're getting 2.51%.
Spain is the second most visited country in the world after France, but it has seen tourist figures falling this year. July saw visitor numbers down 1.3%, and August 0.5% - and those are the two most important months for the tourist trade. The biggest decrease is observed among Brits and Germans, however visits to Spain grew among Irish, French and Russians (Source: Elpais). However tourists in Spain spent 2% more in 2019 in comparison to the previous year, so Spanish economy didn’t suffer a lot.
Of course, Spain offers sun, sea and sand - but so does Turkey, which is much cheaper. As the global economy slows, many tourists are looking for cheaper holidays, where Spain is now at a disadvantage.
Foreign purchases of Spanish property fell 5% in Q3 2019, the Association of Land Registrars says. That was the third consecutive quarter to show a decline. European demand may be affected by demographics, as the "boomer" demand fades away. Holiday rental controls in many areas make it less easy to rent out a villa or flat; without that extra income to pay part of the mortgage, some buyers may have had to rethink their budgets.
There is a little good news in the mix, though. The market is becoming more diversified. As the big buyers from Britain, France and Germany pull back, other countries are coming into the mix. Middle Eastern, US-based and Asian investors are becoming more important - as well as Latin American buyers, with Ecuador and Argentina particularly strong sources of demand.
Socialist Pedro Sanchez is currently trying to form a coalition, which will probably include the leftist party Podemos. If he wins a majority, it's possible he will try to balance the budget with higher taxes, and that might include taxes on property. However, he will try to avoid anything that will hurt the average Spanish resident, so it's likely any such taxes will target luxury properties.
Funcas (the association of savings banks) is looking for a soft landing, with a stable property market, in 2020. Their 'soft landing' prediction was wrong in 2007 - but now the market is nearly a third smaller and prices are not so high, we think they're probably right. However, the Spanish economy is slowing down, and the property market is likely to follow. Smaller developers are finding funds more and more difficult to obtain, which shows banks are beginning to want to reduce their risk.
Our advice, then, is that while Spain remains an interesting market, you should be careful when you're planning a property purchase.
Give yourself wiggle room. Budget carefully and make sure you aren't mortgaged up to the nines. Be careful on valuations. Do your research and make sure you are buying at the right price level.
Do very careful due diligence, particularly when it comes to the amount of new building in the area. Areas with a large amount of speculative building that will hit the market over the next eighteen months will be badly impacted by any weakening of demand.
If you're buying off plan, make sure that you check the developer's financial standing and know how your funds will be protected.
This may not be the right time to buy in the first phase of new resorts - if you're looking at resort properties, head for resorts that are already thriving and well built out.
Look to buy in areas of stability rather than buying where prices have been moving fast. You're less likely to be buying into a bubble.
Above all, be really sure that you are purchasing exactly what and where you want to buy. If you have always dreamt of living in a little white house in a little white village in Andalucia, you'll be fine. If you buy a smart investment in a city centre flat with a good yield, you'll do well. If you just follow the herd… things could get more difficult.