Foreign cash fuelling investment fever in Spanish property

Spain's property recovery is being driven by foreign investment

Some of Spain’s leading real estate experts have told the Agence France-Presse (AFP) news agency that the country’s real estate sector is enjoying a surge in investment – fuelled by foreign cash.

Lured by Spain’s perennial appeal as not only a year-round holiday hotspot but also an accessible, welcoming and warm country with good infrastructure and a varied property portfolio, buyers from northern Europe, Russia, the USA and China have flocked to the market in the past 12 months…

“Since this summer there has been investment fever in Spain,” independent real estate consultant José Luis Ruiz told the AFP. “There are dozens of investment funds from all the major countries, such as Americans, Germans and the UK, who are focusing on Spain.”

What began as a safe and affordable bet in commercial real estate has trickled over into the residential sector as wealthy foreign investors have begun parking their wealth once more in bricks and mortar in Spain. A report by CBRE has revealed that combined foreign investment in Spanish real estate returned to pre-2008 levels last year, doubling to €4 billion in 2013 compared to the previous year.

“Lots of investors, mostly international ones, are coming back to the market, and that is driving a slight recovery in prices,” said CBRE’s Director of Cross-Border Investment in Spain, Mikel Marco-Gardoqui. “Profitability has improved, and so international investors are coming back to the market very actively.”

Ruiz added that it was the British, Germans, French and Russians who have been fuelling the residential surge, which has helped house prices in Spain grow by an average of 0.7 per cent in the third quarter of 2013 – a rise Spain’s National Statistics Institute says is the first quarterly increase since 2010.

Despite being seen as a positive development, some industry watchers warn that Spain’s slight recovery is still wobbly, and could find itself stumbling if external influences take a bad turn.

However, chatter around the property market is markedly more vociferous than it has been for many a year, with the labelling of new types of buyers signalling that confidence has most definitely returned: the ‘Russian Widow’ moniker – a Russian mother who buys a house in Spain for her and her children while husband continues to conduct business in Moscow – is one such character who has recently entered the lexicon of Spain’s estate agents.

Ruiz also notes that middle-class Moroccans are starting to eye Spanish property, while French investors are heading south across the border to snap-up real estate on the Costa Brava for a fraction of what they would pay in the south of France.

As a result, Spain’s Public Works Ministry estimates that the number of homes sold in Spain by October last year was 1.3 per cent up on the same month in 2012. “We have the good fortune to be a country very popular with tourists and foreigners who want to settle here,” concluded Ruiz.

In a market often beset by hyperbole and obfuscation, never a truer word was spoken.