Many property buyers and sellers and the general economic “experts” have been asking will the current Covid-19 crisis adversely affect the Spanish property market and house prices?
Well the short answer is YES the market will change, it already has, but of course we are entering a “new normal” right now so predictions can be wild. After all we have a moving target. What about the Hondón area? Please read this to find out more…
At Hondón Villas we endeavour to keep abreast of the Spanish property market & house prices. It’s helpful to be able to advise our clients. The data and reports we look at are varied and from quite a few sources, such as property portals and official government stats. These, are of course, a few months retrospective, usually quoted as annually or quarterly. Nonetheless, they are a good indicator.
The Spanish Property Market Late 2019
The market reports surfacing now are for Q4 2019 / earlier this year (pre-Covid-19). They all pretty much show the Spanish property market had a positive line with overall, an average 3~5% increase in property prices across the country. Here are a few highlights.
(c/o Spanish Property Insight).
- Kyero.com says Spanish house prices are down for Q1 2020 already. They report the average price of a Spanish property is €249k, down from a figure around €270k at the end of last year. That’s nearly an 8% reduction. We can’t attribute this wholly to the current pandemic though.
- The Ministry of Public Works (Fomento) +2.1% in the last quarter (Q4), based on official valuations
- The National Institute of Statistics (INE) index +3.6% in Q4, based on data from the Land Registry
- The Spanish Land Registrars’ Association +7.2% in Q4, using their ‘repeat sale’ methodology
- The Association of Spanish Notaries index +0.5%% in February 2020
- The Idealista.com (property portal) resale asking price index +3.2% in March
- Two thirds of property for sale in Spain are apartments. Most Spaniards live in flats.
So the 2019 Spanish property market was jogging along OK, but was also showing a slow decline. We at Hondon Villas thought 2019 was a good year locally for us, despite the BREXIT uncertainty. Our key buyers are from the UK, Netherlands and Belgium. All the nationalities seem keen to come to live in our areas. The Hondon area community is about 50/50 locals and Expats. So a few reasons to be buoyant for the local property market but maybe not over-excited given Covid-19 has affected all these key countries.
Where are we in 2020?
We think there will be very little house price data to publish for Q2 2020 now the market is at a standstill. It could be 6 months before we can see how Covid-19 truly affects property prices.
SPI (Spanish Property Insight) did a recent survey of its readers: Foreign investors expect Spanish house prices, in particular holiday-home prices, to fall by 10% or more.
The Hondon Valley, an Established Buyer’s Market
Of course, country & regional property trends factor in the price indicators of cities and towns and the general Spanish buyer’s/seller’s habits. So these reports can be wide indicators as they DON’T focus on local markets like Hondón. For that we rely on our own sales / listings, monitoring other local agents, enquiries and of course the client’s negotiations as they buy or sell. After 15 years in the area we have a good handle on this.
The Hondon Valley property market, since the 2008 crash, has been a buyer’s market. Very few sellers get their asking price and a buyer inevitably makes a lower offer. The prospect these days are wiser to the market.
For non-Euro nationals, like the Brits, the currency exchange rate can also influence property prices. But, prices (as well as supply & demand), give or take 5%, have remained fairly stable over the last 5 years in this area.
It’s worth bearing in mind also that the Hondón Valley property market is established and mature now, with the boom being 15 years ago. This makes it much more transient as Expats move to other parts of Spain, downsize or return to their native countries. Of course migration to & from the area is mainly retired northern Europeans. The local economy is reliant on seasonal agriculture with little in terms of work prospects. There is less reliance on employment or growth. Therefore, resale property account for more of our business than new build and mostly represent better value.
Concern after the long Pandemic Lockdown in Spain
Of course, now the dreaded COVID-19 crisis has temporarily stopped the real estate market for a while. Agents in the Hondon / Alicante region have not been able to conduct house viewings for safety reasons. This should change soon, as we write, Spain is phasing in de-escalation of the severe and long 3 month Covis-19 Lockdown here.
This is a big concern for all parties involved, in what is a key sector of the Spanish economy. Covid-19 has also affected, globally, people’s confidence in life-changing choices, their health and their wealth. Europe, particularly Spain, has had some severe lockdowns, no travel in/out of the country & between regions. Tourism has suffered and has shown depressing stats for coronavirus infections and deaths (about 35,000 deaths at time of writing). External factors and how other countries handle the crisis in health and economy is also likely to affect international real estate markets.
All the above post Covid-19 problems are a worrying mix that will influence the Spanish property market supply & demand and so with it the price negotiations.
Post Covid-19 Changes: A Moving Target
We have no crystal ball on how Covid-19 might adversely affect prices, supply and demand. It’s a moving target. We are, as we write, still on Phase 0 of lockdown in the Hondón Valley. Many say there will be a second Covis-19 spike! But early feedback from clients during this time suggests we can be at least optimistic there will be a local market as we have had enquiries to view and to sell during the lockdown. No-one as yet as taken their house off the market because of COVID-19.
But to what extent the market will change, for now, we are unsure. But many retired Expats will want to return to their home countries for health / family reasons which means new houses coming onto the market. We repeat that our key market is the retired, cash-rich couples still looking for “a place in the sun“. These buyers still exist and are looking for value for money away from the crowded tourist traps.
Also, before Covid-19 we got indication that many Brits in particular wanted to get out of the UK, post Brexit vote. And of course Hondón still offers quality villas & value for money compared to many other northern EU countries.
How will Covid-19 affect the Hondon Property Market?
So, overall, as it stands now, we think there will still be a market worth pursuing in 2020, albeit slower, In general:
– The market will be more competitive as supply will outweigh demand
– We think prices will decline a few % points in 2020 if the crisis continues until late summer or beyond. Certainly buyers will make offers well below the asking price
– It is and will still be a buyer’s market in the Hondón areas for some time
– Seller’s may find they have to realistically price to sell if they want to sell quickly
– Agents will have to offer better value or improve services to gain a competitive edge
– Agent reputation is key in small areas like the Hondon Valley. Agents have shown in the past that they will “steal” clients or use pressure in a competitive market. A bad move or greedy agent will soon find their name is mud in the local bars / social media.
– Continued crisis restrictions on air travel, higher travel prices, accommodation costs and a decline in tourism in Spain has and will continue to dent the market potential for international property buyers in 2020.
– The Hondón property market relies on mainly European buyers. Any airport restrictions, curtailed schedules, quarantine measures or steep price increases in flights will slow the market down. If so, they’ll be less demand for 2020.
– The UK BREXIT plans seem to be on hold amid COvid-19 and may well be delayed if the Coronavirus crisis drains UK resources and effort. Right now it’s an unknown. Uncertainty usually dents a housing market.
– UK buyers and sellers will want more certainty before they make relocation or property plans. Again this could slow the market down.
So on the surface it might look doom & gloom. However, once the crisis is over we think Hondon will recover as a micro-market due to the demographic being mainly retired, cash-rich, mobile and time independent. Many here are rarely in a rush to leave and so have flexible plans in terms of price & timescales. Some play a waiting game or have room to move on price and completion.
We know from experience that new buyers also looking to retire here tend to move quickly on a house they like and can complete quickly. As cash buyers, we find houses are bought outright, such is the value of property here compared to Northern Europe. Rarely are mortgages or chains involved. House Sales can be done in 6 weeks, sometimes less.
Providing all parties realise the market is what it is right now and can find an agreeable price we think there the future will be OK, not fantastic for a while, but OK. We think some sellers and buyers need to be realistic and respectful of the current situation as many long term property owners have had to endure a stormy EU market for 10+ years where most, if not all property here has dropped 30-40% in price over that time. It’s been picking up for the last few years but Covid-19 has may well have undone all that.
Hondon is an established market now. The villas are large and usually excellent value. It’s on many Agent’s radar now, there are collaborations, publicity, it’s a summer holiday destination too now… In general it is very buoyant for an inland rural area.
We can also say that the Hondon Valley area is still a sought-after retirement niche for inland property. The sprawling and quality built Urb. La Montanosa is still very popular with foreigners looking for decent sized villas with pools.
So the Hondón property market kind of ticks over rather than shows growth, as there is no substantial new build or major business opportunities at the moment. Friends and relatives of foreign residents see this, the “real Spain” community, they see the value-for-money and look to buy also.
So we have to be optimistic, it’s our job, but of course, we can only speculate and time is our answer. Maybe you disagree? Let us know.
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If you need advice or help with property sales in our area just contact us. We are always happy to assist. You can call, email, Whatsapp, Facebook or best of all walk into our high street office in Hondón de los Frailes – Contact details here >