The housing market in Spain is resilient. This has been proven by the recovery that has taken place since property prices plummeted following the worldwide economic recession of 2008. That particular recession began in 2006 with the sub-prime mortgage fiasco in the US. The world economy entered a rapid slowdown, and in 2008, the bottom fell out of the stock market.
The last big drop in Spanish property prices
In Spain, property prices plummeted on average by 41.7% between 2006 and 2011. Over the intervening years from those dark days to more recent times, property prices have risen back by nearly 14%.
Now, of course, we have the COVID-19 pandemic to contend with. There can be little doubt that it will signal another significant drop in Spanish property prices. But it is far from all gloom and doom; especially if you are looking to buy. In fact, it could prove to be a great time to buy. Why? Let us explain.
Property prices will dip in the short term
Property prices in Spain peaked in 2006 because foreign buyer activity was at an all-time high. It inflated the real value of houses as it always does when demand outstrips supply. That activity will once again drop sharply because of the pandemic.
People in countries all over the world will lose their jobs, some only temporarily, some permanently. Either way, it will deter people from investing.
The right time to buy
But the good news is that the pandemic will be relatively short-lived. In most countries, it is expected to have peaked in 3 months, and once that happens, people will come out of self-isolation and begin returning to work. The economy will begin to recover with the US economy expecting to bounce back strongly in the third quarter of the year. They are always the market leaders.
Good news for long and short-term investors
So, it’s actually good news all round for the Spanish property market. Buying when prices hit their low means that people looking to relocate can grab a bargain. Buyers looking to purchase properties for holiday letting etc will also benefit. With lower costs, they will see more profit when the tourists start flocking back in the summer months.
Strike now while the iron is hot
Prices should recover in months rather than years, so investors should see good gains relatively quickly. However, the window to buy is likely to be small, so striking while the iron is hot is to be recommended.