Is it the right time to buy in Spain? This is the million-dollar (Euro!) question. We get asked it almost daily by prospective clients, and it’s always a tricky one to answer, because it generally depends on so many factors – both personal and economic. Is there ever a perfect time to buy?
Buying property is not just a financial transaction, but a highly personal one and the most perfect time to buy is generally not marked by external factors, but by one’s personal situation.
However, we can certainly analyse economic indicators to make a sound judgement as to whether it’s a good financial time to invest in property, or whether it would be more prudent to wait. Following are some of the most important financial factors that are currently making it a good time to buy…
Fewer fees due to mortgage law changes
With the new Mortgage Law that came into effect on 17th June 2019, the payment of the bulk of mortgage fees and expenses and IAJD became the responsibility of the bank, which is very good news for all buyers! The banks now have to pay for the “gestoria” (administration), the registry, the notary and the AJD. The buyer is responsible for the valuation and the mortgage setup/arrangement fee. This is a clear improvement of mortgage related costs for the client, as previously all these costs were the the buyer’s responsibility. However, the buyer must continue to provide at least equity for 20% of the appraised value, plus taxes.
Lower interest rates
According to the latest statistics on mortgages via the National Institute of Statistics, the average initial interest rate of interest for residential mortgages granted in March 2019 was 2.34% (variable), and 3.11% (fixed term). A year ago, the average rates were 2.42% and 3.05% respectively. So, it seems that while fixed prices are becoming more expensive, the variable rate is falling.
Investor interest and rental market
The Spanish real estate sector has always been attractive to buyers, for both the domestic and foreign investor. One of the reasons that allows this segment to continue to be in good shape is the rental market, which continues to be healthy. According to the data published by the Bank of Spain for the first quarter, investment in housing in Spain offers a gross rental return of 3.9%. And if the revaluation of the property is taken into account, then percentages exceeding 10% can be reached, so real estate investments are still a fairly safe bet.
Stable property prices
After around ten years of instability following the crash, the price of Spanish property for sale seems to have stabilised, which is now recognised by the general public as well as the property sector. According to the Real Estate Confidence Index developed by Solvia in April, more than half of Spaniards perceive stability in the housing market and expect prices to continue to rise, albeit more moderately and realistically than in the past – which is a very good thing!
You could say that domestic employment (or lack of it) is the real Achilles heel that slows down the housing market in Spain. There are now more first time buyers in their 40s than in their 30s. Many of the young people who do have a job, are being paid very low salaries and under precarious conditions, marked by temporary and seasonal employment, which means that buying a home is pretty impossible for many.
While this not good for Spanish buyers, foreign buyers can benefit, coming from much more stable economies, with a good chance of having enough savings and/or getting a mortgage in Spain to take advantage of the stable prices in the current market. Foreign investment in the market is therefore a key factor in keeping the Spanish property market healthy.
Of course aside from being a safe investment, one of the main emotional reasons for buying a house in Spain is the luxury of having your own place in the sun, ready to use for yourself and your friends and family and paying guests when you´re not there yourself.
The likelihood is that while Brexit may increase the paperwork of UK investors buying in Spain (another good reason to be quick off the mark!), Spain will continue to be a very popular place for the British and other European and International buyers to own a holiday home.
Check out the houses on our website – there are some amazing opportunities for any budget: www.athomeinandalusia.com
It’s time to the plunge, and start a new adventure…