What Happens Next in Spanish Property?

Believe it or not this is the 1000th post written on this blog and the others we had over the years, they were imported here so that's why we know. And of course we find ourselves in a rather strange situation previously unknown. Therefore we thought it would be right to write a post about what happens next, when the Coronavirus lockdown is all over, and the timescales for that.

Firstly, for those of you reading in the USA and UK we are writing this from the future. Spain's timeline of the Coronavirus has peaked at least for now and has turned downwards. This has been done with a huge lockdown (of course we made a Spotify Lockdown playlist which you can listen to below) where we have been staying at home as I write for just over three weeks and the current situation has been extended for another three weeks at the moment until the 26th of April.

When we see the images coming in from those countries which are behind us and still not locking down or sticking to the advisory rules then we are horrified. From here it looks like you will be on lockdown for even longer especially in the USA where a lack of leadership and understanding from the Orange One is leading to a disaster (As if anyone expected anything different. See one of our past articles about the Trumpfuhrer here).

Photo on <a href="https://visualhunt.com/re6/5813d581">Visualhunt.com</a>
Photo on Visualhunt.com

What This Means For Valencia Property and You

Our business relies almost 100% on foreign clients which means a lot of our business is effectively killed off until people can travel again and as can be seen in the graph below that isn't expected to happen for some time. For those clients we have who are already here things will return quicker; people currently renting who are looking to buy, clients looking to trade up (More of that later) trade down or simply looking for a change after realising their current place wasn't perfect for their quarantine.

Deloitte's estimations of return to activity in Spain.
Deloitte's estimations of return to activity in Spain.

The questions we are looking to answer therefore are in terms of what the market could look like after the lockdown in terms of things people are wanting in their Valencia Property, what may happen to prices and what aspects of a property will mean it is more insulated from potential price drops. As a buyer you may be able to make lower offers on certain properties that maybe before you would have been able to do but you would have been told in no uncertain terms where to get off.

When Does The Market Start Moving Again?

One thing you need to remember is that there is a time lag between seeing a property online, visiting it, agreeing on a price, signing the deposit contract and signing in the notary. Typically this time is around 60 days although it can be as little as 5 days and as long as 6 months. (See our article here) Therefore, as currently, and until at least the end of this month we cannot show property for sale and the restrictions look like they will only be lifted bit by bit as in China it would be pretty safe to say that the market doesn't start moving until we are well into the summer and even possibly near to the end of it. The above graph from Deloitte shows their expectations for a return to some sort of normality in Spain and it takes the whole of this year and into next to even get close.

What Do Prices Look Like at That Point?

We think prices are going to drop, of that there is no doubt. With so many people losing their jobs not only in Spain but around the World even if people are rehired relatively quickly at the end of the crisis they will not be in a position to purchase property. Banks require a solid history to give credit and they are unlikely to be keen to lend without knowing what is going to happen in the future regarding a potential second wave in the winter and how a global recession may affect prices. Most Spanish people rely on mortgages to purchase and look for mortgages up to 80% as interest rates are historically low. If prices look like falling then banks will reduce their loan to value ratios and may only give 50-60% mortgages which will take a lot of people out of the market.

At the same time they are likely to receive more stock from developers who go bust due to cashflow issues and whose developments are largely finished but they cannot sell the properties. Banks will finance these properties more easily than those on the general market but most of those properties are not in areas that will continue to be in demand, many are second homes.

This means that demand lowers and of course when demand lowers then prices tend to fall. However after the experience of the financial crash post 2008 we expect the following to happen.

Buyers will expect low offers to be accepted. Sellers will be reluctant to lower their price quickly as they hope for a recovery, a recovery which the media will be selling them every day after the crisis as green shoots appear. Sellers will use that famous Spanish phrase "Tiene muchos novios" ("There are lots of people interested in the property" but literally "It has a lot of lovers") and refuse low offers. This will create a disparity between asking and offer prices which will continue to put downward pressure on prices and mean the market remains stuck.

Nevertheless, some prices will be pressured downwards more than others. The downward pressure on prices on the Costas will be huge. The more a place depends on tourism, on foreign demand and non local factors the greater the price drops will be. If you are a developer trying to sell 100 identikit apartments to foreign buyers and demand has gone completely does the price have a bottom? How low can they go? The major conurbations of Madrid, Barcelona, Valencia, Bilbao and Malaga for example will have lower price drops as local demand will still be there even if it is not as buoyant as it was before the virus.

How Quarantine Has Changed Our Perspectives

The foreign buyer of Spanish Property has always looked for certain things which now seem no brainers, outside space, extra rooms, cable internet, good areas with facilities to hand and the ability to do everything without needing transport.

Terraces are now even more highly prized and private terraces even more so. Expect to see lower decreases in prices for apartments that have private outside space, houses with converted garages for gyms, offices or guest rooms and gardens with enough space to get your daily exercise. In fact the more beautiful the garden the better the chance of some price insulation because a lovely garden is so much better to be surrounded by than one that is an oasis of easy maintenance but ugly printed concrete. Don't get me wrong, prices may well still decrease here, and indeed decrease sharply, but these features will insulate those properties from the worst of the price drops. This is especially true if it seems that we may have to return to quarantine in the future if there is no progress on a vaccine.

However, there are also other things that may become even more prized. A garage space may be seen as more valuable now as people try to avoid crowds on public transport and want to be able to get from their apartment to their garage in a lift and from their garage to their workplace without coming into contact with others.

A townhouse may become more valuable as you have everything to hand and life is easier than having to get into a car every time you want to go out and buy things.

Houses may become more in demand than apartments as the price of houses looks attractive for the amount of space you get compared with that you get in apartments and that there is less chance of transmission of the virus from person to person if you are not sharing and touching, front doors, buttons on lifts, local bins, stairwells and other communal areas.

You get more townhouse and house for your money in the towns that surround the main cities in Spain than you do in the "in-demand" areas of the city for apartment living and the appreciation of space is one thing that everyone will come out of this crisis with.


When things open up again it may well be that the high street looks very different. Many small and medium sized businesses will not reopen as they go out of business and into bankruptcy during the lockdown. The Spanish government, like most others, has put measures in place to help out small and medium sized businesses and the self employed but obviously many will fall down the cracks or have overheads that make their future viability impossible.

This will mean life doesn't go back to normal. Life will change, lifestyle will change. However the Spanish people will still want to get back to doing what they have always done, that coffee with friends, the meal out, loads of the things pointed out in our 112 reasons to live in Valencia post here and our last post about the everyday things we are missing.

Long Term Rental Numbers Increasing

Airbnb has been destroyed worldwide as travel and short stays have disappeared almost overnight. Inevitably travel will not just restart to the same levels as before. The hotels that survive will put special offers on and try to inhibit any comeback and they may well be supported by governments in that endeavour, especially in a country like Spain that depends so much on tourism.

Expect to see a large increase in the availability of long term rental apartments and a small reduction in prices. This will make it easier to find a place at a decent price but places with terraces, gardens, local facilities etc... will continue to be more in demand. The larger the apartment the more in demand it will be at a decent price. That extra room for an office will be important for many people who have gotten used to working from home.

For investors looking to increase their rental portfolio this could be a good time to buy to let as the demand for rentals will increase as people who wanted to buy no longer can (See above) and will need to rent. And as prices will drop returns will remain OK.

Trading Up and Trading Down

Expect to see locals and foreigners already living here trading in their property for another more suitable one. I have already heard it expressed that a terrace on an apartment is now an essential. Others have intimated that they are now more interested in larger houses than smaller apartments, which oftentimes can be similarly priced. When you buy and sell in the same market then any price drops, or even rises, are compensated so the question is more about suitability of your property. If you have always wanted a sea view, a lovely countryside view or a beautiful garden it might be time to get it.

Anecdotally the enquiries we are getting on Valencia Property are more for houses in the last couple of weeks than for apartments but the city of Valencia remains hugely attractive as a place to live and work for many foreign buyers so we hope that the demand for apartments comes back.

However, we have also heard the opposite, people who bought large houses expecting lots of visits and the houses seem too large now the situation has changed. They have realised that you should buy the house for yourself not for the potential visitors you may have once a year. For those not requiring extra rooms for kids to study, offices or gyms then those empty rooms are just one more to clean.

Part Two To Come...

These are our initial thoughts but they will develop as the situation develops. We will come back to it in a second and maybe even a third blog post in the next few weeks and keep you up to date with what is happening in Valencia and beyond on our social media feeds. (Twitter, Facebook, Youtube)

Again we look forward to getting back to some sort of normality and welcoming you to Valencia in the near future. If there is one lesson in life we may all come out of this with it surely should be don't put off what you really want to do with your life because one day you might not be able to.

Meanwhile take a look at our last few blog posts below. Just click on the images.

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