Spanish Real Estate Investing (1 of 10)

Spanish Real Estate Investing guide - (1 of 10)

Introduction

That is our first article in a series of 10 articles. The objective of these series is to share our knowledge of the real estate market in Spain. We know that investing internationally can sometimes be challenging, but we want to make our small contribution, helping to alleviate possible difficulties. In this first article, we will start with a short introduction and content index.

All the information contained on this guide is based on our experience operating in the Spanish market.

Market Outlook

Since the crisis of 2008, the real estate sector has been recovering slowly. From 2015, until now, we have seen a constant rise in prices.

Price growth per quarter (SPAIN)

Price in EURO / SQM (SPAIN)

As you can see in these graphs, which reflect the entire Spanish market, (provided by Tinsa, one of the leading Spanish appraisers), even with extremely low interest rates, the pricing is still timid. It is for that reason, that to understand the market, we must have a closer look at the local markets.

Madrid & Barcelona markets

Madrid

Price growth per quarter (MADRID)

Price in EURO / SQM (MADRID)

Barcelona

Price growth per quarter (BARCELONA)

Price in EURO / SQM (BARCELONA)

The two largest cities are the ones that are leading the growth and the rise in prices. Barcelona, more explosively, and Madrid, more stable. Barcelona, due to tourism and its international image, is more speculative, Madrid, city of the government and without so many changes, is more thoughtful.

As you can see, they remain at a considerable advantage compared to the rest of Spain. But, as we know from our network of contacts, this growth is stagnating, especially in Barcelona. We believe that prices will stagnate in both cities (or at least, that there will be a little less growth than experienced so far). Not a stop, but definitely a break.

Although in 2019 and 2020, global economic growth will suffer a significant decline, the forecast is that Spain will maintain a level of sustainable growth (you could find more details here). This growth surplus of Madrid and Barcelona, will be able to endure, and move to other locations.

Valencia market

Understanding that the big cities have reached their price limit, at least in Barcelona, at the beginning of 2017, we started to analyze other locations. We have analyzed the main spanish second-tier cities, and we came to the conclusion that Valencia was the city that we were looking for.

The reasons on which we have based this statement are deepened in future articles, for the moment, we will list only the most obvious reasons:

  • Market liquidity
  • Low prices
  • An aged housing stock
  • Housing affordability compare to income

We could appreciate the differences between Valencia, Barcelona and Madrid by comparing the following graphs and those shown above.

Price growth per quarter (VALENCIA)

Price in EURO/ SQM (VALENCIA)

We could find the same characteristics in many second tier cities around Spain, not just Valencia, but many others: specially cities within moderate travel distance (1 hour or less) of the main cities. Probably Valencia is not the perfect city to apply our strategy, nor does it have the best characteristics, but from the beginning we felt comfortable in this market. To be comfortable, is also, part of the strategy.

We will talk in other articles, about these second tier cities, that meet the requirements we need to develop our investment work.

We have been in this changing market, adapting to the new context, and evolving with it, improving our capabilities as investors. For that reason, this guide was designed in order to help the investor (from amateur investor to senior) to avoid problems and get the desired ROI.

Please, feel free to have a look to the rest of our guide and our website. You will find the index of the guide below these lines.

(aUTHOR)

I'm the operations coordinator of Bluebricks. I'm the guy managing all the operations related to Real Estate. Check my Linkedin profile here: https://www.linkedin.com/in/adriacre/

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