Is it Really Time For the Big Boom?

Last week on the blog we promised to look at what will happen over the next couple of years in the Valencia property market according to "experts" in this area. Since then I have been asking questions, looking at recent articles from said "experts" (For example here if you read Spanish) and taking stock of what we are seeing at the moment to come up with a finger in the air and see a "which way the wind is blowing prediction" for the property market in Valencia and Spain for the next couple of years or so.

In this post and next week's post we will attempt to answer the question in the title, is it really time for the big boom? Because a lot of people are predicting an explosion in the Spanish property market despite prices having risen considerably already over the last ten years. Today we will start by giving you the background to these predictions.

First though the caveats. This is what is happening at the moment. If you don't want to believe me then don't. Ask around yourself. However, do not jump to the usual conclusions of saying "An agent talking the market up!" or rubbish like that. We don't talk rubbish to stimulate demand, we are busy enough as it is. We have looked at rentals, already made sales and potential purchases along with trends and developments and some things are clear whereas others things... well, not so much. Equally I'll cover my back here and say any predictions here or next week could be blown off course by any number of World events, climate change, political change, wars and even the Orange Sh*tgibbon getting back in could change things dramatically and I don't think we have space for the Trump refugees if the serial rapist/convict/liar/creep/conman (Take your pick) gets back in. So let's go

Having talked with my colleagues, other agents, developers, notaries, lawyers and buyers and having looked at what at what they expect and are seeing (and also when they are going to come here to buy in the case of the future clients) and also having looked at some of the predictions for the market on a national level that are being made I think the following are the general points people made. I'll talk about each of them in turn later and in the second part of this post next week and then we'll go into greater depth in future posts.

  • The market is extremely strong at the moment
  • Most people expect the market to get stronger as interest rates drop this summer
  • Supply is limited and getting worse
  • Demand continues to grow from a national and international level
  • First time buyers are having problems finding suitable properties at reasonable prices
  • Investors are investing more
  • Government policies are not having the desired effect
  • Mortgages are getting easier to find
  • People are moving to the suburbs to find value
  • Rentals are almost on the point of being impossible to find for foreigners and not great value for residents
  • It's better to buy than rent
  • There are not enough new builds
  • There are not enough affordable options being built
  • The "Guiri Jails" should be made residential to give first time buyers a chance.
  • Immigration numbers are increasing demand
  • Bidding wars are happening!

The Market is Extremely Strong at the Moment

I'm not going to say that there are ten buyers for every property as there aren't. There are however ten or more buyers for every decent property. If you like it then someone else likes it and they are just as likely to be able to buy it as you are for reasons we will deal with later. As demand continues to increase then the competition for each good place gets tougher. At the same time the number of good properties on the market continues to fall.

Supply is Getting Worse

As each good property gets sold there are fewer and fewer to find and things aren't coming onto the market quickly to replace those properties. There is no speed to sell because those maybe wanting to sell know that there isn't much choice for them to buy and move to. Therefore the only places coming onto the market are people happy to stick with their price and their conditions. No desperate sellers still, no four horsemen of the apocalypse or motivated sellers. We talked about this just two weeks ago. The situation hasn't changed since then of course. .

Most People Expect the Market to Get Stronger

Interest rates are expected to fall this summer as inflationary pressure falls away and as they do then more people will be looking for property and getting a mortgage. Banks are in a weak position at the moment for making money and are having to compete for clients to make money from them. They also have a lot of cash on their balance sheets and money from lots of people who put money into savings last year as interest rates rose. Smaller banks and building societies (Cajas de Ahorro) and moving strongly back into the mortgage market and some are even starting to offer 90% or even up to 100% mortgages. One bank is now also backing the government's scheme to help first time buyers by being the guarantor for bank lending. Nothing to lose for the banks there when they give a mortgage to a young person because the government will pick up the tab if the buyer defaults.

By the end of the year experts are expecting fixed rate mortgages to be around 2% again and variable rates to be 1.25% above base. They may be slightly higher for you as a non-resident buyer but those are very tempting rates for anyone looking to buy their first property of course and also especially tempting for investors looking at the burgeoning and massively overheating rental market.

Demand Continues to Grow at a National and International Level

Demand is coming from everywhere. On a national level there are lots of jobs being created in Valencia and people are coming from other parts of Spain, especially rural areas and smaller towns into the city. This is a phenomena mirrored over all large cities both in Spain and Europe as a whole. Equally there are more and more students studying in Valencia meaning that there is also a demand from parents to buy their children a place they can live in and share with others as rentals are so difficult to find. And this is a huge demand factor too. As rentals are so difficult to find people are deciding to buy instead and as mortgage rates come down then the differential between mortgage repayments and ever rising rental prices will increase even further meaning more demand on purchases.

On an international level Valencia continues to be spoken of highly in the international press and from influential groups such as Internations. This good publicity means that more and more people are attracted to Valencia as a good place to live, a place to work remotely and a place to retire to. Despite recent price rises on both a rental and purchase side Valencia is still seen to be a very affordable place to live for those coming from places where the cost of living is considerably higher.

The First Time Buyer Issue

Fewer properties available alongside higher prices and more competition means that first time buyers, generally younger people, are having problems finding places to suit them especially in Valencia itself. There is a movement as a result towards commuter towns around the city for first time buyers where public transport makes it easy to get in and out of Valencia to work or study.

This of course means that there is also more demand and rising prices around the city both in terms of purchase and rental. The most in demand towns are seeing very little supply in both rentals and sales adding to the upward pressures on prices.

Another factor helping first time buyers under 35, and thus increasing demand, is that the government has put in place a new scheme whereby first time buyers have the 20% extra required to buy a property guaranteed by the state meaning banks can offer first time young buyers 100% mortgages. A recent report revealed that up to 45% of younger buyers plan to buy using the scheme. Two of the main banks have already signed up to the scheme and have started to offer these mortgages for qualifying clients.

People are Moving to the Suburbs

People are moving to the suburbs to find value and also to improve their quality of life; more space, more green spaces and less noise. As above in the case of first time buyers, people looking to move and looking for space are often being forced to look further afield in order to find what they want. Also because prices in the city have risen so much the places that they are leaving are selling for more meaning they can afford more in the suburbs too. If you receive an offer too good to refuse on your city flat then a house with shared pool, gardens and possibly gym just 10-15 minutes from the city is a great option especially for those who can work at least partially from home and don't need to go in and out of the city every day. Nevertheless, 10-15 minutes is a sweet spot as people don't mind making that journey, once we get to half an hour and more Spanish people don't look to do that.

My daughter has just bought a place to the north of the city where she has a choice of metro, train, bus or car to get in and out of the city very quickly and she is just five minutes away from the beach. For 128k she got something that would be at least double or treble that anywhere in the city. Not a bad deal for a fifteen minute commute.

Government Policies are not Having the Desired Effect

It should come as no surprise to anyone who knows about the history of government interventions in the housing market but the desired effects of the changes that the government has made recently on housing have not worked (the new under 35 guarantee scheme has not really hit yet).

Rent controls on long term rents have meant there are fewer long term rentals as owners moved into the short and medium term rental area. Equally the change to rentals meaning that tenants don't pay agents for finding them long term rentals (One year and upwards) now mean that agents don't offer them, they offer 11 month rentals instead where they can charge and the tenant loses tenant rights such as automatic extension of the contract and limitations on price rises during the course of their rental agreement (Despite this being essentially illegal). These measures therefore have meant that again there is a drying up on supply pushing up prices.

Then we go onto the Golden Visa.

Getting rid of the Golden Visa has no effect at all on the housing market.

The thing that would have an effect is putting greater restrictions on Airbnb. Golden Visas were included in the "Ley de Suelo" which was due to pass parliament last week. However because of disagreements between the government and their coalition partners the law has been dropped. The Golden Visa part of it was presented as an "enmienda de ley" last week. You can read about it in our updated Golden Visa post here.

The Ley de Suelo will come back to parliament after the European Elections and before the summer in a modified form supposedly meaning but the ending of the GV is likely to be in the Autumn now unless it gets kicked even further into the long grass (As we hope it will do) This doesn't necessarily mean that the Golden Visa will continue long term but it does mean that it will continue for a little bit longer so make it quick.

Why though will getting rid of the Golden Visa have no effect on the housing market?

Because if you are looking to buy a single property for 500k plus to get the Golden Visa then you are not competing with first time buyers, young people and families looking to buy their properties. You are only competing with already comparatively rich people for higher end properties. And the truth is the majority of Golden Visa purchasers are people looking to buy a single property, not a lot of cheaper properties to rent out, and they buy their property to live there or use it as a base for their retirement and/or work. Of course once they live there they pay taxes every day on their purchases and contribute to the Spanish economy not to mention paying 10% tax upfront on their purchase (At least in Valencia). They become net contributors to the Spanish economy without taking anything out as they are required to have private health insurance among other things and are not a drain on the economy or public servies. Getting rid of the Golden Visa is a total red herring but it plays well as a populist move as the government is seen to be doing "something". It isn't working and won't ever work to free up supply in the market.

Part Two Next Week

There is so much more to write about but we don't want this article to get too long so we will write more in part two next week (As next week is now in the past you can see part two here or by clicking the image below). And then we will answer the question posed here, is it really time for the big boom? Tell us what you think before we come to our conclusion next week.

However, we still have news from Valencia and a couple of properties of the week below so keep reading and then of course click on the related posts below for more information about things to do with Valencia Property.

News From Valencia

A couple of big news events in Valencia this week. Firstly there is going to be a moratorium on giving licences for ground floor "apartments" for Airbnb. This suspension will be for a year initially. It's a reaction to the explosion of this type of accommodation option known locally as "Guiri Jails" due to their use for foreigners visiting the city (Known colloquially as Guiris) and the fact that they generally have bars in front of the windows. We will see the effect this has on the market for shops on backstreets which have experienced huge price increases since this style of accommodation came into vogue.

Secondly Valencia will be banning Megacruisers docking in the port from 2026. This type of cruise disgorging thousands of people into the city centre and clogging up areas around the Cathedral, Central Market, Railway Station, Bullring and Town Hall brings very little to the city in terms of income and annoys virtually everyone who lives here. The reason they are not banning them sooner is that the 2025 reservations have already been done. Tourism is good, overtourism and especially of the cruise type who spend a few hours in the city and spend very little isn't.

Apartment of the Week

A No Nonsense Nest Egg near the beach. No need for a long rambling descriptive piece today, what we have is a property that is absolutely ideal for investment. A stone's throw from the beach, great connections to the city and close to plenty restaurants and beachfront bars just down the road.

The apartment has been completely renovated and ready to rent out. You are looking at a very decent return on your investment here. This is a property that is easily rentable in the medium term, which will also give you the freedom to block a few weeks here and there when you want a bit of R&R by the Med yourself (Prime location for students also, which would leave the summer months free for you to rent out or for personal use).

Not a lot of properties are coming on the market down by the beach these days, and anything decent doesn’t tend to stay on the market for very long so get in touch pronto to arrange a viewing.

Villa of the Week

Ok no, nobody for tennis, I didn’t think so, and neither are the owners of this house as you may make out from the photos, large plots usually mean a space is dedicated to recreation and exercise but good intentions quickly fade away after the 5th double fault goes into the rose bushes and you have cramp after 10 minutes in 35º. Sometimes it's a huge Fronton Court, sometimes it's a rectangular piece of concrete with some fading painted lines that will never see a net, almost always it becomes an eyesore, however it does provide a extended area that can be designed and landscaped and put to good use.

Never mind all that, location is the most important word here and you can’t get any closer to the town, unless you bought next door, which isn’t for sale. The house itself has seen some recent improvements but needs a bit of TLC to hone the finished article, FYI we do lots of renovations for clients and it’s all about the know who and “How fast can they start?” nowadays.

Five bedrooms, 3 Bathrooms, an outdoor annex, garage space, covered terraces, barbecue area, garden, pool, living room and kitchen in a very quiet spot and a 400 metre walk to the town.

Definitely worth a look, and if you really do want to run around you could drop in a glass box Padel Court and see those extra pounds drip off during the summer months, so whos up for a bit of Sauna Balls?

If You Liked This...

Then we often talk about the market, see some of our previous posts here. Just click on the images below.

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