Category: Hondon de los Frailes

[August 2020] What a year so far!! Here are some rambling thoughts for now … in a very fluid 2020!
As we write we are 6 months into the Covid 19 pandemic. Masks, sanitising and social distancing are still compulsory here in Spain. It has affected all our lives in some way. By now most of us have seen personal and professional problems as a result of the pandemic… losing family or friends, unemployment, businesses closing, financial hardship and a general difficulty in coping with the uncertainty.

It’s this uncertainty and the restrictions on activities that lower people’s confidence in their immediate futures, their short-term plans. Life changing decisions, like changing jobs, investment, holidays, moving house & migration, will be put-off or even cancelled for now. There’s a knock-on affect of course. And we are not out-of-the-woods yet (August 2020).

House Price Index (Spain)

So it is fair to say that Real Estate in Spain (a key economic driver) over 2020 will continue to be & has already been impacted by various Covid related lockdown restrictions in travel, employment and the economy. Spain’s House Price Index* and property sales volume has been a snail’s pace upwards from 2013 to Q1, 2020… but because of Coronavirus we suspect the index to drop when the whole of 2020 figures come out, especially if things do not improve with the pandemic. Brexit will also be in the mix come Q1, 2021. How we’d like a crystal ball right now!

The graph above (c/o Kyero.com) shows a steady price increase from 2013 up to pre-Covid but also shows how prices dropped steadily after the crisis of the 2008 crash. You can also see that Spain still has not reached the heady days of the property boom before 2008.

* General Council of Spanish Notaries Public.

Sales & Mortgages Down

Kyero also report that during this last year up to April 2020 both the volume of sales and mortgage approvals have taken a dive just as Covid was taking a hold. Up to Q1 2020 there was a 39% reduction in sales volumes and -18% less mortgages approved in Spain. In our Valencia region sales are down 12%.

Hondon Valley Area…

Whilst Hondon Villas (the Hondon Valley, Alicante, Spain) saw no meaningful business during the lockdown period it has been surprisingly buoyant since we all went back to “normal” work mid-June. Trading conditions are still difficult but interest in buying / selling in Spain and in our case, the Hondon Valley area, is still keeping us busy right now…. thankfully.

But we would not be human if we didn’t show concern about our industry and our livelihood. Business wise it’s hard to justify investment right now or taking on more staff…. are all an if/but debate. Not knowing demand & supply is a strain. Paying bills, like rent and wages is a stress.

Still we are far from beat yet … Real Estate in general is an awkward cash-flow business anyway, relying on sporadic, unpredictable results (especially since the crash of 2008) and we don’t get paid until completion of the sale. So we are used to forward planning and ensuring we have a “float” to work from. In our case we can see creditor payments in the pipeline for pre-Covid sales to give us some comfort. That helps. And our appointment diary is busy for the short term at least.

As you’d expect both seller and buyer are cautious right now and we are all trying to work out the game plan. Of course the seller always wants the best top price and the buyer wants to barter down the price! Nothing new there then.

It’s a fact that in the Hondón areas in general, the supply of property out strips the demand = buyer’s market !! And it means buyers are gold. A seller that will not negotiate, can and do regret it. Covid may well have exacerbated this.

In the Hondon Valley areas, we’d definitely say it is still a buyer’s market, houses rarely get the asking price. Typically, 10/15 K off the asking price is normal… and buyer’s like to make the “cheeky offer” a la “A Place in the Sun”, and they are more savvy to the Spanish property market than we were 15 years ago. So seller’s have to be realistic and motivated on price if they want to sell.

The Brits can mitigate this if they play the Sterling/Euro exchange and are returning to the UK with their equity. Just a few cents per pound can make £1000’s on a sale of a house. So if a Brit bought during the boom €1.46+ to the £ era, then the lower exchange rate is now in their favour going back to the UK.

Also, we know the local Hondón economy is not wholly reliant on full employment as there are few jobs and careers here anyway (apart from seasonal farm work / construction / hospitality. We rely on the investment and pension income of foreign property owners in the main. The market and area here is now about 20 years established… so we are on the property map so to speak for re-sales and new build. It’s money in, very little has to go out, so to speak. So in that way Hondón is a bubble and can buck the national trend.

So…. overall as we write…
we, at Hondon Villas, still believe and are increasingly getting more confident that Spain, and the Hondon Valley areas, is still a massive attraction for relocation, retirement and holiday home purchases. There is no lack of enthusiasm to live abroad in sunnier climes. After all this area is still as beautiful, tranquil, very Spanish and houses prices are amazing value compared to northern Europe. We attract mainly affluent, cash-rich 50+ age groups / retirees from the UK, Netherlands & Belgium looking for that slower sunnier lifestyle so they are not so worried about employment or the cost of living.

Yes, the Spanish Real Estate market might take time to pull its socks up post Covid, but the green shoots are already here in Hondón. Caution is still key of course and not withstanding a worsening of Covid-19, or another strict lockdown on travel / hospitality.

One thing for sure we do know is that Spain has plenty of property available if and when anyone needs it and to suit all budgets and tastes, inland or coastal. The Spanish government may even add incentives or tax breaks to encourage the property market like they did post 2008 crash. Hopeful.

Here’s hoping to a post-covid shopping spree on Spanish property. Salud!