Ibiza Property News
Lower Mortgage Rates Boost Market Recovery
Figures published by the Association of Spanish Notaries, showed 71,275 new residential mortgage agreements during the first quarter of 2021, a rise of 18.7% when compared to the same period of last year and representing an upward trend that looks set to continue when information for Q2 is released.
This is surprising, given the challenge of the global pandemic and its effect on the economy, but nonetheless welcome news for the recovery of the Spanish property market and in line with the steady and unpredicted growth of demand for home ownership in Spain. The 12-month Euribor, a base rate used to calculate interest payments, ended the quarter at -0.486% resulting in a negative rate some 83% higher than that of 12 months ago. In real terms the effect would be a modest but crucial monthly fall in loan repayments for holders of Euribor based Spanish mortgages.
The response of central banks to the coronavirus have led to the further decline in the Euribor which began its fall after the financial crisis some 12 years ago and has continued to nudge into negative territory over the course of subsequent years. Just as recovery of the Euribor looked imminent, the pandemic hit and pushed interest rates lower, which is welcome news for buyers in a position to borrow funds, particularly for those who have remained relatively financially unaffected by Covid-19.
House sales in Spain rebounded in March this year as the world looked toward a future of travel less restricted than in the dark days of March 2020, but there were wide variations between regions with the relatively constricted market of Andalusia showing the highest percentage of growth amongst coastal areas at 78%. Madrid saw an increase in property sales of some 71%, whilst Costa Blanca real estate transactions rose by only 6% and the Balearics along with Tenerife in the Canary Islands saw a slight decline in acquisitions when compared with March 2020, when Spain was in full lockdown.
A possible explanation for this is that the islands are traditionally popular with foreign investors seeking holiday homes and after, a full year of uncertainty, potential buyers are waiting for the green light. This scenario would possibly create a surge in demand for property during the last quarter of 2021 as restrictions are lifted and travel becomes easier. Just as property sales are showing a stronger recovery than previously anticipated, the mortgage market is also growing at a rate that could not have been predicted, making home ownership in Spain accessible to a wider customer base.
Properties in coastal destinations will always remain attractive, but the market is evolving and city properties in areas such as Barcelona are generating a new demand from a different demographic of buyer. A second home in Ibiza, however, is the ultimate dream of many potential investors and new initiatives in quality construction, as well as the availability of more affordable mortgages could be the key to the sustainable future of holidays as well as an opportunity for more people to make a sound and highly lucrative investment in property on the island.
Spanish Property Market Looks Good for Recovery
There was positive news recently for the Spanish property market despite a drop in sales due to the ongoing pandemic and travel restrictions. Figures from Spain’s National Statistics Institute (INE) showed a 4.6% drop year-on-year during the month of February 2021, surprisingly small given the impact that COVID has had since March 2020. Unfortunately, as house sales began to recover at the end of 2020 Spain, along with the rest of Europe, was hit by the third wave of COVID and the market suffered. The first quarter of the year showed an overall drop of 17.7% in sales for January 2021 the deepest slump in ten-years.
The subsequent roll-out of the vaccine in Europe and the reduction in the number of cases has sparked a new optimism for recovery, given the unexpected buoyancy of the market. Sales of second-hand property fell to just over 33,000 in February, a drop of only 8% compared to the same month in 2020 and a 5.5% increase on January this year. This indicates a swift and remarkable recovery. New builds have proven to be even more resilient with sales showing the highest growth since July 2014. Compared with January, sales in February rose by an impressive 20.4%, with an overall rise for the 2021 first quarter of 5.6%, on the same period in 2020. The figures quoted relate to Spain as a whole and, of course, there are variations in each region.
The Balearic Islands have, undoubtedly, suffered more than some other regions of Spain, due to strict travel restrictions, and less tourism. According to INE figures, there has been a fall of 15.9% in property transactions throughout the Balearics, whilst the Canary Islands saw a drop of 16.2%. In regions such as Murcia sales have only fallen by 0.1%, and in largely residential regions of Spain transactions have even increased. La Rioja, for instance, saw a rise in sales of 13.7% year on year. This would seem to indicate that the market is set to recover.
The traditional holiday destinations have seen a surge in construction projects in anticipation of the lifting of restrictions, and islands such as Ibiza will have added to the supply of property for sale as demand increases. There is also the consideration that more people are buying houses for the purpose of spending more time in Spain, as the revolution in working from home, brought about by COVID, has proven that, in many cases it is a viable and very, attractive prospect.
Interest from foreign investors has never waned and enthusiasm has not been dampened by the extra effort required to buy during these difficult times. The continuing increase in transactions over the the year, even while the threat of the pandemic is still on the horizon, indicates that Spain’s property market will thrive again now that contagion rates are coming down, more people have access to vaccinations and borders are being lifted. A good sign for buyers and sellers alike and a reason to be optimistic about the future of home ownership in Spain.
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