2021 Property market expectations

Covid-19 has had less of an impact on the Spanish property market than anticipated at the start of the pandemic. Yet with the ongoing uncertainty over the impact of vaccine programmes, forecasts have yet to identify clear trends for 2021, with reports of lower demand, higher sales and lower prices all currently in the mix.

KEY TAKEAWAYS FROM 2020

The story at the close of 2020 was quite different to the 650,000 transactions forecast by analysts at the beginning of the year.

Compared to 2019, the average house price fell by 1.7% in 2020, says Tinsa, the property valuation group. In contrast, Spain saw a 0.9% rise in new construction, the lowest increase since 2016, according to valuation firm Sociedad de Tasación.

Data published by Spain’s National Statistics Institute confirm this, at least up to October 2020. New build transaction levels dropped less than those of existing properties.

VOLUME AND PRICE OUTLOOK FOR SALES IN 2021

Annual sales in 2021 could be above 400 thousand units.

House prices could fall by up to 5% in 2021 according to Spanish economic and business newspaper Expansión, whereas sales are expected to increase. A similar drop of 5.6% is forecast for the rental market.

Driven by a reduction in foreign interest, housing demand in Spain? could fall by 25% in 2021 compared to 2019 levels, according to the real estate investment firm Colliers. A closer look points to a drop of 20% in new build and large-scale developments, and of 33% in existing housing. 80% of all transactions are likely to be in residential sales of existing stock.

In terms of finance, repayment terms will prompt buyers to look towards new builds, despite the fact that prices in this part of the market have not and are unlikely to drop as much as with existing housing.

MARKET OPPORTUNITIES IN 2021

A period of opportunity is now opening up in the property market, according to experts and companies in the sector.  Growing confidence in public health improvements will encourage both Spanish nationals and foreign clients to resume activity and facilitate visits to different areas for buying, selling and investment.  The 5% price adjustment, a view shared by entities such as Spanish estate agency Solvia, is set to prompt greater interest in buyers.

Despite a reduction in profitability, the fact remains that the return on property investment continues at levels in excess of 5%. Mortgage rates are low, and there is no prospect of a change in the short term.

Spanish households reached their highest ever levels of domestic savings capacity and gross disposable income in 2020. Demand will continue to be channelled into smaller cities and rural areas, where houses tend to be larger and less expensive.

An increase in demand for energy-efficient single-family houses with open-air community services is also expected to increase.

Property information tools, such as online valuations, market analysis and price monitoring, as well as the possibility of carrying out virtual visits to the house and neighbourhood will drive purchase decisions.