Impact of Brexit on Spain’s housing sector recovery

Spanish housing marketSpanish housing market

Spain’s property sector is on the up and up again, as can be seen from the trend in housing purchases over the last two years. These have been rising at double digit rates, fuelled by a recovery in the jobs market combined with favourable financial conditions. Overseas demand for homes has also been solid over the last few quarters.

So is it all good news then? CaixaBank Research highlights the variety of different trends which the strong foreign demand for Spanish property conceals. The analysts explain:

On the one hand, most of the purchases are located on the Mediterranean coast and the Islands (Canaries, Balearics). These account for over 30% of the total of property buys in some areas.

On the other hand, the trend in the purchases is very different, according to nationalities.

In this respect, the uncertainty surrounding all things Brexit and the pound’s sharp fall over the last few months is definitely weighing on UK citizens’ enthusiasm for acquiring a property in Spain. In Q1 2017, their purchases declined 13% year-on-year. That said, CaixaBank Research notes:

This drop is being more than offset by demand for homes on the part of French, German, Belgian and Swedish nationals.

In Q1 2017, their purchases rose by 20% or more on a year-on-year basis (data accumulated over four quarters).

So while the UK is still top of the list of overseas buyers, this country’s purchases accounted for 15% of total foreign buys in Q1 2017 compared with 21% in 2015, CaixaBank Research says.

Looking ahead, if Brexit negotiations are favourable and the pound recovers some of its lost ground, then UK buyers could return to the Spanish housing market, CaixaBank analysts note. But they make the point that further uncertainty over Brexit, particulary with regard to a possible ‘hard’ Brexit, “could cast a cloud over any recovery…UK nationals have traditionally been very sensitive to economic conditions in their own country.”

On the upside, the analysts flag the healthy economic outlook for the other countries with interest in buying Spanish homes.

This factor, along with continued flexible monetary conditions and the decrease in political uncertainty in the Eurozone, provides an opportunity for the Spanish property sector.