“Housing prices will double in just a little over ten years.”

Alexander Von and Steen Teven founded the real estate agency Lucas Fox eighteen years ago, focusing their efforts on foreign clients looking to purchase property in Barcelona. Since then, their company has earned a reputation as a leader in the luxury real estate market in Spain. In this interview, where they take turns answering questions, they emphasize that Spain has become a popular destination for both Europeans and U.S. citizens. They also predict that the growing demand from high-income international buyers will lead to a sharp increase in property prices, which could double over the next ten to twenty years.

“Spain is currently at the peak of its popularity and attracts wealthy individuals from around the world as an ideal place to live.” Last year was challenging for the real estate market: housing sales declined; however, the luxury real estate segment, in which Lucas Fox operates, showed resilience. Last year, 965 transactions were recorded, which is 12% less than the previous year, while the average price reached 1.03 million euros, increasing by 7%. Our net revenue amounted to 29.7 million euros, which is 9% less than in 2022, when we set a record due to the positive impact of the end of the pandemic. We were unable to close more deals because we did not have enough properties available.

But isn't this an indicator of a certain limit to the demand for the expensive real estate you offer? Yes, indeed, there are many local buyers who would like to purchase housing but are facing financial difficulties, especially due to rising interest rates. Nevertheless, Spain remains attractive to international clients from various parts of the world, including Latin America, Europe, and the USA. We are confident that prices will continue to rise in prestigious areas and large cities. This is similar to what has happened in cities like London, New York, or Paris. While there may be years when price growth is not significant, in the long term, over a period of fifteen to twenty years, they could even double.

Undoubtedly, this creates certain problems for local residents, who do not always have the same financial means as international buyers, but similar phenomena are observed in many major cities around the world. Many are asking whether local authorities should intervene to prevent this situation. The regulation adopted in Barcelona, which requires 30% of new residential projects to be allocated for social housing, has led to a situation where almost no residential properties for free sale or social housing are being built in the city. At the same time, prices for existing properties are rising, making access to the market even more difficult for Spanish buyers.

It is clear that there is a need for affordable housing in the country; however, it is important to find solutions that have proven effective in other cities. For example, one could consider the possibility of building affordable housing in other areas in exchange for permission to develop in the city center. This is important for both the city budget and the population, in order to avoid a situation similar to some areas of London, where housing is almost vacant because it is purchased by people living abroad who rarely visit. This creates negative consequences for all parties involved.

Have you decided to focus your efforts on Madrid, considering the limited number of properties in Barcelona? There is also a shortage of quality housing in central Madrid. In Spain, most real estate has a horizontal ownership structure, which creates obstacles for development. Unlike other countries, where there are more properties with a vertical structure that can be demolished and rebuilt, in Spain, it is often challenging to update old buildings.

It is important to emphasize that interior design is becoming a significant factor in such properties. How is Lucas Fox's business distributed by regions? Currently, 60% of our market is concentrated in Catalonia, but we have also maintained strong positions in Menorca, Ibiza, the Costa del Sol, and Valencia. We have opened an office in San Sebastián and are planning to expand to Mallorca. In Madrid, we already have four offices, but even though it is the leading luxury real estate market, growth in this region has not come easy for us.

You are both the founders and owners of Lucas Fox. Have you considered the possibility of attracting an investor to accelerate the company's growth or even going public? We generate a net cash flow, and our EBITDA margin is over 20%, although it decreased to 17% last year, so there is no need for additional investments. If we decide to expand our operations internationally in the future, then we might consider this option. For now, we believe we are too small to go public.

Nevertheless, Lucas Fox already has representations outside of Spain. Yes, we have been operating in Andorra for many years and our business is doing well there. We have also opened offices in Montpellier, France, and Porto, Portugal, but this is mainly for testing the markets in those countries. We have received requests to open offices from other countries, including regions of the Adriatic. Our goal is to expand in Portugal, but not this year. Most likely, in Portugal we will choose a mixed model, like in Spain, with our own offices in key cities and tourist areas, as well as franchising in less popular locations.

You have chosen a model where your staff works as employees, unlike other luxury real estate agencies that prefer to collaborate with independent agents. We have 250 employees, half of whom are foreigners. It is important to create an atmosphere of loyalty and stability, which is why we place great emphasis on training and developing our staff. We sell expensive properties to high-end clients, and more than 70% of them are foreigners who are used to receiving a high level of service. Our commission is justified by providing professional experience and knowledge of the nuances of the real estate market both in their home country and in Spain.

What is the difference between the luxury real estate market in Barcelona and that in Madrid? The main difference lies in the composition of buyers: while Barcelona has many clients from Latin America, Madrid is seeing an increase in demand from American citizens, although buyers continue to come from various countries. Interest in Madrid has noticeably increased after the pandemic, as Spain as a whole attracted attention with its quicker lifting of restrictions and tax incentives.

Do events like the America’s Cup influence interest in real estate in Barcelona? At the moment, no, as the participation of teams in competitions has not yet affected demand. However, Barcelona's international reputation has significantly improved over the past few years, especially after it went through a wave of political instability and security issues. Recently, both the Cup and the establishment of a new hub for AstraZeneca in the port, along with the emergence of numerous tech companies, are creating a positive outlook for the city's future.

What is the reason for the growing interest in real estate purchases in Spain by foreigners?

Spain attracts wealthy individuals, and at the moment it is the best choice for living. We are in contact with affluent Americans and residents of Northern Europe, and they all aspire to start their lives here. The reasons for their choice include the quality of life, cuisine, and significantly lower living costs compared to their home countries. These clients are different from those who came many years ago when retirees with low incomes were looking for housing on the coast. Now, they are successful entrepreneurs, investors, digital nomads, or wealthy retirees who do not rely on local social benefits or healthcare, and therefore can contribute to economic growth. We see the current situation as a great opportunity for the country, and it is worth noting that Spain is indeed handling this situation very well.