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15 October, 2020

Residential property prices in Spain will drop by 4% by the end of 2020

The cost of Spanish housing will fall by 4% by the end of 2020. This forecast was given by analysts of a large Spanish bank Bankinter. They also voiced their assessment of the dynamics for 2021.

Prices for residential properties in Spain will fall
Photo: Adobe Stock

By the end of the year, not only will prices be reduced, but also the total number of housing purchases and sales transactions concluded. The bank's experts believe that by 2020 the decline will be 35% compared to 2019. Low activity on the real estate market due to the crisis and the COVID-19 pandemic affects the price reduction.

Forecast property prices in Spain 2021-2022

Bankinter estimates that Spanish property prices will fall by another 5% in 2021. In April this year, the Bank predicted a 6% drop in prices by the end of 2021, but by October the forecast had worsened. The total decline in value for 2 years will be about 9%.

In the case of individual regions and types of real estate, the drop in prices may be even greater. In major urban centres, the downturn can reach double digits. For example, expensive real estate in prestigious areas could fall in price by 10% over 2020-2021.

Analysts assume that the real estate market will not start recovering until 2022.

Villa worth €630,000 in Costa del Sol, Spain

Developers opinion about falling real estate prices

In July 2020, Spanish developers said they were concerned about the fall in demand from foreign investors. The General Secretary of the Spanish Association of Developers and Builders, Daniel Cuervo, addressed the government. He proposed to temporarily reduce the minimum amount of investment in real estate under the residence permit program in 2 times - up to 250 000 €.

According to developers, reducing the minimum investment amount will increase the attractiveness of the investment programme and support the real estate market during the crisis.

We spoke in more detail about the offer in the material "Residence permit Spain: investment in real estate can be reduced by 2 times ".

The Spanish government has not yet commented on the developers' proposal. If the authorities decide to accept such amendments, investors will be able to participate in the programme at a lower cost. The drop in prices also increases the attractiveness of the programme 一 as investors will be able to purchase better properties at a lower cost.

Purchase of property under the residence permit programme

We believe that the Spanish real estate market now has favourable prices for investors. For the purchase of real estate investors can get a residence permit of the country for themselves and their families.

The Spanish residence permit programme has 4 options for investment:

  1. Purchase of real estate for the amount from 500 000 €. You need to own the property from 5 years.
  2. Buying shares of Spanish companies or creating a deposit in a local bank. Minimum investment amount - € 1 million.
  3. Buying government bonds from € 2 million or more.
  4. Establishing a business project in Spain. Minimum investment amount - 1 million Euro. The government must approve the project for participation in the programme.

In our experience, buying a property is the most popular option. It requires less investment compared to other options. However, the investment can be returned in 5 years. Therefore, the drop in real estate prices 一 is a good period for foreign investors.

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Residential property prices in Spain will drop by 4% by the end of 2020