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Prospects for the real estate market in Spain after the coronavirus crisis: 2020-2021

We are at a time when there is serious uncertainty in the Spanish real estate market mainly motivated by the extraordinary situation in which we find ourselves.

We are not going to explain here what has happened in Spain, and in the rest of the world. The reason for this report is to analyse the prospects for the evolution of the Spanish real estate market in the remainder of 2020, and 2021.

For this, we are going to differentiate between several widely different sectors within the Spanish real estate market:

– The Spanish national demand: First and second residence

– The international demand: First and second residence

– New & Off Plan,  and second-hand (resales)

– Long-term rental market and Short-term -tourist rental  – and “season rent”

– Position of the owner who wants to sell his property now

1.- THE SPANISH DEMAND: Nationals and residents in Spain

Starting with the demand for the purchase of FIRST RESIDENCE, and with regard to the national market, understanding this as the demand for homes from Spaniards (nationals or residents), will suffer a great stagnation.

This is a sector, that has been very affected in recent years, and that, despite the fact that house prices in the main capitals and cities of Spain have been increasing, the acquisition power of the medium-average-Spanish-citizen has not increased in the same proportion. This  has generated that, year by year, the medium-Spanish citizen has gradually lost purchasing power, limiting (and even blocking) access to buying a house.

Therefore, in recent years, there has been a decrease in merchanting among Spanish citizens (especially among young people), due precisely to the loss of purchasing power, raising rent as the only means of access to housing among young people in Spain.

It is logical to think that, from now on, in a crisis situation in which we find ourselves, the situation will be worse, since the economic capacity of the average Spanish citizen will be greatly diminished.

With which, it is expected that the demand for main residences in Spain will decrease considerably until at least 2022.

In the same way, the SECOND RESIDENCE market, that is, the national demand for second residence, will be affected by the crisis situation in which we find ourselves, since the prudent position of savings that leads to this crisis is going to be the general norm,  for at least a couple of years.

There is already talk of declines in home sales prices between 15 and 30%.

Said all that,  investors, or savers, that currently keep purchasing power, will find real opportunities in the market, especially from this autumn, when the economic effects derived from this crisis begin to be recorded more solidly in the market.

With which, from an “investor’s point of view”, and just as it happened after the crisis of 2008 and 2011, Spain will once again be an interesting destination,  and attractive for savers, national and international investors.

2.- THE FOREIGN BUYER – Investors and individuals

Regarding the international demand for foreigners, we understand that the SECOND RESIDENCE market will have a strong impact, and we do not expect a rebound until well into the year 2021.

Above all, what refers to the market for the sale of new construction, and under construction, we understand that there will be a stoppage in the construction of second-home, especially in tourist places, such as the Mediterranean, and the Balearic and Canary Islands.

From an “investor`s point of view”, the greatest opportunities will exist in the second-hand market, to the detriment of the new construction. This is so, because individuals may have a greater margin of reduction in the sale price, since, depending on the acquisition time, they may have amortized a large part or the total of the purchase price, allowing a greater interval of reduction in the sale price. .

This, with regard to new construction, is not going to be like this, and we will see a smaller reduction, and of offer in the market, given that builders have less margin of price reduction than individuals.

With which, the resale market, or second-hand, is the one that is going to offer the most interesting opportunities in the market, at least until the effects of the economic crisis that we have above disappear.

Therefore, as we have mentioned in the national market, there will be real opportunities for the international investor-saver who has purchasing power in the second-hand market in Spain.

Regarding the international market for the acquisition of FIRST RESIDENCE homes, also called “expatriates (or “expats”), who intend to come to Spain to live, either for a better quality of life, or to spend their “pre-” or “retirement ”, we believe that the evolution will be very positive.

Spain is one of the most desired countries in the world to come to reside permanently. It has been a constant for more than 30 years. In fact, and especially from the year 2000-2002, the volume of purchase operations of retired or pre-retired foreigners has remained high, even in times of crisis.

Early retired, or retired, mainly from European countries such as the United Kingdom, France, Belgium, Switzerland, Germany, etc. is considered as “latent demand”. That is to say: They always have the intention of coming to Spain to spend his retirement, motivated by good weather conditions, quality of life, communications, security,  and public health.

However, in recent years, this type of demanders has suffered a decrease in their purchasing power, caused by the increase in house prices in Spain.

Therefore, and as a consequence of this current sanitary  crisis, this type of buyer is going to witness the emergence of real buying opportunities, at very low and interesting prices, in areas and properties to which, up to a year ago, they would simply not have had access.

This type of buyer, normally of advanced age, in addition to the price, or the level of quality of life, takes into account the level of assistance of the Spanish public health.

Therefore, it is worth thinking, or wondering, what is the reaction it causes in this type of clients, the way in which the Spanish system has managed the coronavirus crisis.?

From our point of view, as Spaniards, who have lived in the forefront of managing this health crisis, we must say that the image of Spanish public health has been strengthened.

The main failure of the attention and reaction against the virus has not been the existing infrastructures and human resources in Spain (overflowed only in some areas, and temporarily), but secondary elements that have been, mainly, the lack of equipment.

Simple matters like masks, or respirators, or appropriate clothing.

However, as we say, the rest of the equipment and infrastructures, especially the human team, of doctors, nurses, and health workers, have been up to the task, demonstrating their effectiveness and reaction to an impact of such volume, even in situations of total absence of equipment and adequate protection.

 ( As Spanish, we  all are really PROUD OF OUR SANITARY TEAM)

In other words, it has been shown that the Spanish public health system works, and that it has a lung and infrastructure to serve these types of clients.

In addition to public health, there is a high quality private health in Spain with prices much lower than the private health of the countries of origin of these buyers such as France, Germany, United Kingdom, etc., which, together with efficiency of our public health, make both achieve a very high quality image in this type of buyers, of mainly European origin.

On the other hand, with regard to other countries in the world, the Spanish public health system has proven to be much more effective and with much more guarantees of protection, than that which exists in countries such as the USA and the United Kingdom, where healthcare Public is very basic, and where private healthcare is predominant.

As result of the above, higher interest of buying a first residence in Spain are expected in countries such as the United Kingdom, the United States, and other Latin American countries such as Mexico, Venezuela, Argentina, Brazil, etc., by citizens of these countries whom they will find more protected and cared for by Spanish public health than that of their own countries of origin.

Finally, to add another point that this type of buyer-client now takes into account when deciding on their purchase, is the economic cost of living and services. Precisely, because of this crisis, for a few years in Spain we are going to witness a considerable reduction in prices both in food and products, as well as in services. With which, the economic cost of living of this type of customers, will be favoured by this reduction, which will facilitate their purchase decision in Spain.

Therefore, we conclude that, both the reduction in the sale price of the properties, as well as the confirmation of a consistent public health system, and of a quality private health service, will surely make targeting the client’s purchase intentions. international in homes of first residence.

Regarding the SECOND RESIDENCE, as indicated by the domestic market, the medium-level foreign buyer is not expected to make the same volume of acquisitions that we have been experiencing in recent years.

Especially since 2015, we have experienced an increase in the volume of second home acquisitions by international buyers facilitated by an economic improvement derived from the economic boom experienced in previous years, as well as in the hope of obtaining returns on these properties. through rental, especially tourist rental.

Obviously, we are going to see a loss, or decrease in perspectives regarding the possibilities of tourist rental, since, at least during the year 2020, and 2021, the level of travel and communications will affect the tourism sector, and therefore, those who wish to invest with the intention of renting for tourist use.

However, and with regard to the SECOND HAND, as we mentioned with respect to the first residence, great opportunities are sure to arise both in cities with high tourist potential and in the main cities of Spain, which good insurance, they will attract the attention of international savers-investors.

3.- THE RENTAL MARKET – Permanent rental – Tourist – Season

As for the rental market, we are going to differentiate between renting a first residence and a second home.

Regarding the RENTAL OF FIRST RESIDENCE, in recent years, we have witnessed an increase in rental prices, based on the owner’s hope of obtaining higher returns in the tourist rental sector,  especially motivated through the appearance of platforms such as Airbnb, etc.

This has brought as a consequence a real problem among Spaniards, especially young people, of a lack of permanent rental offer, especially in the main cities of Spain, which have led to a reaction by the Spanish administrations, by creating restrictive regulations on the use of the properties as a tourist rental, in order to favour the rental for first residence, and, in this way, try to avoid the increase of prices of the rental of the first residence.

One of the main coronavirus’ consequences in Spain is precisely a total loss in tourist activity, which is not expected to rise until the next summer of 2021.

Therefore, many homeowners are surely already wondering what to do with those homes that until now were used for tourism, and that, in search of profitability, they will be forced to use them for renting their first residence. With which, shortly we are going to experience an increase in the supply of first residence homes in Spain. Both in large cities and in the coastal areas.

And regarding the SECOND RESIDENCE RENTAL, although the tourist rental, that is, “for days” or “for weeks”, we think that it will be affected by the health crisis, we think that “seasonal” will not…..

Historically, the traditional tourist rental in Spain has been the “seasonal rental”. That is, the rent by months, or by seasons: summer, autumn, winter, spring, etc.

It was not until the revolution of digital platforms such as Airbnb, which has allowed to reduce stay times and manage private rental activity in an almost entrepreneurial way, which has changed this system, reducing the number of overnight stays per guest.

Therefore, a reduction in the volume of short-term rental operations is expected, but there will surely be a rebound in “seasonal rentals”.

We have to say also that the activity of “touristic rent” is extremely limited by regions or local administration, and even forbidden in determinate areas. It passes from very complicate documents, requirements, etc.  But, this is not the same as per “seasonal rent”.

Renting for “seasonal rent” is totally free of the very strict limitations of the “touristic rent”. It is totally free. For example, to rent as “seasonal” you do not need to register the property in special registries, nor to obtain the certificate of habitation, and the property can be rented “by rooms” (in Valencia region houses cannot be rented by individual rooms in tourist rent).

So, we expect to have more rent transactions using the “season” formula than the “tourist” one.

Following our explanation, Spanish and foreign families will continue to have vacations, and they will continue wishing to come to Spanish beaches, or to Spanish cities, to spend their vacations.

The volume of vocational demand will decrease, but the rent activity will not disappear. And, when organizing holidays, tourists will be conditioned by:

  • More limited movements, and therefore more time in each place.
  • Safety and hygiene conditions
  • They will avoid crowds or crowded spaces

Therefore, this type of tourists, when opting for accommodation possibilities, will choose those in which they are guaranteed security and disinfection with respect to the pandemic. And this guarantee of safety and disinfection will be much greater in apartments than in hotels.

This is so, because hotels, where there is normally a large flow of guests, may initially create insecurity among them when guaranteeing adequate protection. And this does not happen when staying in an apartment, where the flow of guests and overnight stays will be less than hotels, since it can be rented for weeks, or months, by the same family.

For all the above, we think that the “seasonal rental activity” will be an excellent opportunity to those owners who, especially in coastal/tourist areas, where the demand for first residence is low.


Until last month,  the seller was the one setting the rules in a bullish buying market. High demand in sales transactions in recent years encouraged sellers to take positions of power in negotiations of conditions of sale.

However, from now on, the market has changed….

Now it is the buyer who will eventually take positions of power in negotiations with the seller.

The consequence of this is that the buyer will be much more demanding when negotiating the purchase conditions with the seller, not only with the price, but also with respect to the documentation of the property.

In other words, if in recent years the buyer has been less strict when it comes to requiring legal constraints on the properties, from now on, the buyer will surely demand that the seller comply with all the conditions and requirements of the law. regarding their properties, such as urban conditions, occupancy licenses or certificates of habitability, efficient water and electricity connections, septic tanks, etc.

For all this, those owners who intend to put their properties for sale, we recommend that they carry out a detailed and in-depth study of the documentation and legal situations in which their property is located, in order to facilitate their sale.


Study carried out by TLA-Abogados April 2020