The slowdown in the economy is cooling the real estate market. Due to that, smoother price increases are expected.
Spanish property prices
1986 – 2019
Spanish property prices didn’t increase each year from 1986 to 2019. Indeed in 1992-1993, and in 2009-2015, real estate prices decreased in Spain.
A great analysis was published on CincoDias, showing how real estate prices grew from €300 per square meter in 1986 to €1,637 per square meter today.
Another interesting observation: the Spanish real estate crisis brought the prices back to what they were in… 2004! Nevertheless the seven years of crisis (-35%) are long forgotten. As you can see below on the graph, we’re back to house prices increases since 2016. Yet we’re not talking of +10% or +20% yearly, as it was the case in the 1980s or 2000s. It’s a very moderate growth, below 5% per year.
Buying a property in Spain in 2020
Cash-rich VS cash poor: why the Spanish banking system is creating a new crisis
About 25% of the Spanish people rent a home.Not by choice, but because of the Spanish banking system. Indeed, Spanish banks provide a loan-to-value of 70% to 80% maximum. Therefore, many people could theoretically afford to buy a home in Spain, but can’t because they don’t have the savings required to do so.
The Spanish paradox
That’s how we get to the Spanish paradox: there are now two million additional jobs compared to 2004, yet number of real estate transactions is 31% lower, and number of mortgages is 70% lower.
What can you buy in Spain for €250,000?
Valencia, Spain VS Paris, France
You’re probably wondering why we are comparing Spain and France, Valencia and Paris. I simply love both cities, and find the comparison interesting, because these two real estate markets are extremely different, although separated by a 1h 50 minutes flight only.
Buying a flat in Paris with €250,000
With a €250,000 budget, you won’t buy much in Paris. According to our searches on Trovit and PAP, you’ll get a studio flat of maximum 25 square meters. And that won’t be in the first four arrondissements.
Buying in Valencia with €250,000
Now, let’s use the same budget in Valencia, Spain. For €250,000, you can buy a luxury 4 bedroom apartment, fully renovated by architects.
If it’s a rental investment, each bedroom can be rented for €450 per month, representing €1,800 per month in revenues (8.64% gross yield).