Spain : unusually well supported by international buyers

17% of international buyers is unusually high

In 2015, there were over 400,000 house sales in Spain. International buyers were generated over 71,000 sales which is more than 17%.

Let’s look at the number of transactions, in blue, and the number of transactions made by international buyers in Spain over the past years :

Let’s think about it :  total sales in Spain are now around 400,000 a year, which is only 50% of what it was in 2007.

Clearly enough, international buyers are picking up much faster than Spanish buyers.

What is happening ? Mortgage lending & the consequences of the previous housing crisis in Spain

A great article from Kyero.com mentions the following fact :

“Mortgage approvals in February 2016 were still nearly 80% below their peak in February 2006. With the economy growing, unemployment falling and house prices at all time lows, we could reasonably expect to see more Spaniards buying homes.”

But this is NOT happening. Why ? Because banks remember the previous housing crisis. They do NOT want to lend money to people that might not face their monthly payments.

Banks typically use the income multiple, to grant a mortgage to a potential buyer. For example, if the potential buyer is interested in a 200,000 € house, the bank will expect that he earns at least 50,000€ a year (imagining we are talking of a single buyer).

This multiple factor of 3-4 times annual income is considered as a safe range, for obviously risk-averse bankers.

So, are house prices 3-4 times annual income in Spain ?
This way, we would have a good situation in which banks easily grand mortgages to Spanish buyers. Let’s have a look at the current multiples :

The purchasing power issue : Spanish home prices compared with Spanish average salaries

In  Madrid : the average house price is 150,187€.
However, the average yearly income is 24,576€.
So, a typical Spanish buyer would need 6.1 years of revenues to buy a house in Madrid. So, for this house of 150,187€, banks would typically ask the potential buyer to have annual revenues of minimum 50,000€ a year, while the potential buyer typically earns 24,576€ a year.

And it gets worse in other provinces :

Room for international buyers

Therefore we can conclude this article by simple facts.
Spanish salaries are disconnected from Spanish house prices, which creates an issue due to risk-averse banks that are asking for high guarantees in order to prevent a housing crisis once more.

International buyers however, can take advantage of this purchasing power problem, and get on board to buy Spanish houses, supported by higher wages for example in the UK, France, Switzerland, or Sweden. The income-multiple plays in favor of international buyers, all the more in post-crisis housing markets where banks are risk averse.

Thanks for reading my latest article. For more information about how to connect you international property buyers simply, click here:  http://www.listglobally.com/advertise-to-the-world/ or email me at reiser@listglobally.com