A total of 100,768 Spanish Home Sales Transactions took Place in Q1

According to Spain’s Land Registry, a total of 100,768 home sales transactions were completed in the first quarter of this year, the highest recorded level for the last eight quarters. Buyers looking to invest in a Marbella property or in Malaga at the Costa del Sol were surging back to Spain in increasing numbers.

Marbella is still the preferred destination for buyers from around the world. Boasting some of the world’s largest super yachts at Puerto Banus, a vibrant celebrity culture in the town’s clubs and restaurants and a stunning coastline of 26 km with beautiful beaches, Marbella remains the aspiration for many would-be buyers who come on a holiday and start dreaming of permanent residency.

The Land Registry also reported a continuation of decreasing home values. In Q1 house prices fell by another 2.32%, bringing the cumulative total to 30.3% from peak (2007) to present day. However, this has had a positive impact on the housing market, as more foreign buyers are able to afford a home in Marbella or elsewhere at the Costa del Sol.

While at the end of last year and beginning of this year the Spanish government was contemplating to grant residency permits to non-EU buyers who invested in excess of EUR 160,000 in a Spanish home, consultations with their EU neighbours have brought about a sort of U-turn on the issue. Initially, this incentive was aimed at Chinese and Russian markets, as more holidaymakers from these two countries came forward and expressed an interest in Spanish property.

Now non-EU investors buying a Spanish home worth more than EUR 500,000 are to be granted residency permits instead. Targeting wealthy buyers in particular, the Spanish government hopes to attract investors to the country who may also invest in job creation or purchasing public debt of EUR 2 million plus. The latter two categories would also qualify an investor for a residency permit under new plans.

Spain’s Deputy Prime Minister stated that her government was merely using other EU nations as a measure of how to proceed, as other EU member states were already handing out residency permits to “wealth creators”.

At the same time, new laws governing the declaration of world-wide income  are putting off the very buyers Spain’s government is hoping to attract.
 
So where do all these bewildering changes leave buyers trying to find their dream home in Marbella, Malaga or Estepona?

For buyers with more than EUR 500,000 to invest there are already shortages of prime Costa del Sol properties; while there are plenty of homes on the market generally speaking, only a fairly small proportion of resale homes corresponds to modern tastes for clean lines and quality design in the upper price brackets. Luxury sea view apartments are becoming increasingly rare. At the same time, the market for properties below the EUR 350,000 level is awash with resale and new homes.

Planned taxation changes for holiday lettings have also put a dampener on investors’ enthusiasm of late, but with around 14 million international tourists visiting Spain in the first four months of this year, the temptation to invest in holiday property at the Costa del Sol is greater than ever.

For the moment it is mainly Russian buyers and investors from Nordic countries who are taking the plunge; while buying a holiday home for own use is still a straightforward transaction, buying a retirement home for permanent relocation to Spain requires careful research and advice from a tax advisor with expertise in Spanish taxation and investment matters.

Spain’s amazing accessibility by air has largely contributed to the country being a preferred destination for buyers. Budget airlines transported around 11.4 million holidaymakers from world-wide destinations to Spain in Q1 of this year.
 
Around 65% of these tourists chose hotel accommodation, but the rest prefer holidaying in their own homes, or in self-catering accommodation or staying with relatives or friends - a clear indication of how much revenue tourists with their own holiday home are contributing to the Spanish economy every year. Alienating them, when they are only just returning to the home buying market, is not in the Spanish government’s interest.