11 months of uninterrupted growth for Spanish real estate chains!

Spain has had 11 consecutive months of real estate growth, surpassing the previous month's strength and showing no signs of fading. As published in previous articles, since the official "end" of the Covid pandemic, buyers have rushed en masse to buy real estate in Spain. Spanish savers have collectively accumulated over 944 billion euros in bank deposits in the last 2 years (when we were all restricted by the government and unable to spend). This is the largest historical figure of bank savings in Spain to date!

There are several reasons to explain this buying trend other than record savings rates. First, the rampant inflation since 2021 (caused by irresponsible money printing by central banks in an attempt to avert a Covid-induced crisis), the disruption of the global supply chain caused by a virus that is still ongoing, and the illegal invasion of Ukraine have exacerbated and intensified the inflation problem around the world. As a result, we are facing double-digit inflation that is gradually eating away at bank savings. Savers are understandably concerned. We have not experienced inflation this high since the 1970s, at the peak of the Cold War.

Central banks have announced that they will "moderately" raise interest rates in the coming quarters, so now is the best time to take out another "cheap" mortgage loan, as they will become more expensive over time. When you add to that the fact that cryptocurrencies have had a hard fall in recent months (wiping out most of them), savers are buying real estate like there's no tomorrow to protect their savings.

This has produced a buying boom (especially in the major Spanish cities and on the coast) that has taken real estate prices to new heights, reminiscent of the last property bubble of the early 2000s. In Madrid, for example, property prices have already reached an all-time high. Property prices across the country are up an average of 8.4% year-to-date.

This could mean that the real estate market still has plenty of room for prices to rise before reaching previous record levels (except for Madrid, of course, which has already reached them). Madrid is a special case, as it attracts more than 80% of all foreign investment in Spain thanks to its relentlessly fast-paced economic and tax policies, as well as deregulation, which have created a safe environment for investment. Andalusia and Madrid, thanks to the wise attraction of investment through the pursuit of liberal economic policies (both national and foreign), have become two points of attraction for investment in Spain. They are certainly the two regions of Spain where it is now easier to make money.

Spanish real estate developers are finding it difficult to meet strong demand, due to a sharp increase in the price of building materials as a result of Covid's impact on the global supply chain, which is delaying delivery times. The sharp increase in the cost of construction materials, in turn, forces developers to increase the selling price, creating an ominous spiral effect, increasing the overall cost of selling real estate. This leads to market imbalances and price distortions, as you can find a secondary sale property (with exactly the same size and location) for much cheaper than a new build!

No one can predict how long this bullish trend will last. But it is clear to me that looming interest rate hikes will cool this buying frenzy and slow the market. But right now, we are certainly in a buyer-dominated market.

At Larrain Nesbitt Abogados we have over 19 years of experience buying, selling and renting real estate. We also specialize in immigration and residence visas. You can contact us by email at [email protected], by phone at (+34) 952 19 22 88 or by filling out our contact form to make an appointment. Larrain Nesbitt Abogados - small in fees but quality in service.