Foreign Investment Saves Spanish Property from Crashing

2007 marked the definite conclusion of Spain’s decade-long property boom, with prices rising overall by a modest 4.8%. This increment represents the smallest since 1997 and stands in sharp contrast to the yearly rises of up to 20% experienced only four years ago.

A look at the figures provided by the Spanish Ministry of Housing (MiV) reveals that the growth in prices over 2007, just over the 4.2% rise in the consumer price index, was owed in large part to the popularity of key overseas property destinations within Spain.

Murcia, currently one of Spain’s top hotspots among foreign homebuyers, experienced regional price increases far above the national average at 8.1%. Andalusia, despite being affected by areas where prices suffered most (such the 2.1% price drop in Córdoba), saw an overall increase of 4.8% thanks to the enduring appeal of its Costa del Sol, where British, German and Dutch enclaves continue to take root and grow.

Other areas popular among overseas property seekers that experienced growth exceeding the national average included: the Balearic Islands (6.9%), Catalonia (5.8%) and the Canary Islands (5.8%).

These strong regional markets, propelled by investment from foreign buyers, provided a positive counterbalance to the price drops experienced in 11 provinces throughout Spain. Were it not for the positive influence of foreign investment, national property values would have taken a downward turn rather than experiencing a rise of nearly 5%.

Property values took the sharpest downturn in Zamora, where prices decreased by 5.1%. Other areas where prices fell included Ciudad Real, Córdoba, Soria, Burgos, Castellón and Guipúzcoa – none of which are popular among foreign homebuyers.

Besides the price drops experienced in unpopular areas for overseas property, there were an additional 10 regions where prices rose below the increase in the consumer price index. Among these were Zaragoza (2.1%), Guadalajara (2.8%), Toledo (2.9%) and Segovia (3%).

These weak numbers in Spain’s most inactive regions were counterbalanced by investment from foreign homebuyers in the country’s thriving overseas property markets, making foreign investment the saving factor in the Spanish property sector throughout 2007.

Patrick Collins works as a property consultant and content writer for oppSpain a Spanish real estate agent that is specialised in selling off plan property in Spain and new developments.