Five reasons why Spanish property is hot again

Spanish property is back on the agenda for thousands of Brits, and with good reason.

The dream, they said, was over. The boom years for the Spanish property sector, which stretched like a gloriously debauched summer over the first seven years of the millennium, ended abruptly in 2008 as much of the world’s major economies were plunged into recession.

Spain was particularly hard hit, not least its construction sector, which only a few years before had been the driving force behind the economy’s sterling – if unsustainable – performance.

As the industry contracted, media outlets across much of Europe, particularly the UK, declared the dream of owning property in Spain over. With prices plummeting, few banks lending and even fewer – it felt – people actually able to afford to buy, there was an undoubted downturn.

But the dream never died, it just evolved. Today, as Spain’s economy shows encouraging signs of recovery, thousands of Brits have flocked back to the Spanish property market. This time their approach is less “how can I make money fast” and more “how can I realise the dream of owning a lovely, affordable home in Spain”.

And there are five key reasons just why this dream is becoming a reality for more and more Brits every day…

1. Prices are no longer plummeting

For all its kinks and idiosyncrasies, the most curious thing about the real estate market – almost any real estate market – is that it is at its most attractive when prices are rising.

A stronger economy leads to stronger price growth, and Spain is firmly back on the right track.

As property values across Spain fell by an average of 40% between 2007 and 2012, investors and buyers stayed away. Money could not be made and bargains could not be found: what felt cheap today would have been even cheaper tomorrow. So everybody adopted a Wait and See mentality.

The slowdown in price falls began at the beginning of 2013, and by the end of last year property in some regions, such as the Costa del Sol, actually began to increase in value. In 2015, prices nationally have risen by an average of 4.2%, with further increases expected next year.

2. Mortgages are available again

Fingers burnt by Spain’s property slump, many of the leading lending institutes in the country simply tightened the criteria for a mortgage, essentially excluding all but those buyers who could pretty much afford to buy a home outright from the market.

Mortgages are more attractive and attainable for many buyers.

As Spain’s economy improved, however, so did the banks’ attitude towards mortgages. Low interest rates have helped, as has a recovering job market, but it was up to the banks to loosen the lending criteria at the right time to get the market moving. The early signs are that they played this waiting game to perfection.

3. The strong pound

Everything is interlinked, and the strength of the pound sterling over the past 15 months has been no coincidence. In relation to the euro – which has been weakened by the ongoing fiscal strife throughout many parts of the Eurozone – the pound has surged to a nine-year high.

And what do Brits do when armed with a valuable currency and insatiable thirst for Spanish property? They buy. Slow at first, the surge in British buyers has turned into a veritable flood since the first quarter of this year, with Brits accounting for around 21% of all property sales to foreign buyers in Spain so far.

4. The stronger job market

It is not just Brits, however, who have been snapping up Spanish property. Germans, Scandinavians, the Irish and the French have all returned to the market, but there is one group in particular who have been welcomed back with open arms – the Spanish themselves.

As unemployment soared to 27% during the bust years, doom and gloom settled across Spain like a rarely seen cloud. Hundreds of thousands of young Spaniards left, while those who stayed behind tightened their belts and sought to ride out an economic storm that brought not one, but two recessions.

Sunny skies for the job market, the property market, and, well everybody.

Today, as labour reforms have had the desired effect, the future looks far healthier for many young Spaniards – so much so that there has been a notable uptick in the number of first-time domestic buyers, and it is a trend that is set to continue for the next couple of years, experts agree.

5. The country remains wildly popular

Whether offering the best social life for expats, the hottest weather on the continent, the best beaches, the finest cuisine or simply the safest package holiday option in Europe, Spain has – despite recent struggles – maintained its appeal.

The culture, climate and history of the country have moulded the nation we see today, and it is a nation that is regularly the most visited country in the world many years running. Spain is doing something right, and continues to do something right as the economy recovers – a potent combination that should set the nation in good stead for many more sun-soaked decades.