Property prices in Spain

There is no doubt that the so-called “Golden Visa” has had a major impact on property prices in Spain with buyers from Russia, China and the Middle East flocking to the region. Despite the fact that minimum investment in Spanish property, to qualify for the so-called Golden Visa, is €500,000 this can actually be spread across a number of properties. Official figures suggest there has been a 2500% increase in the number of buyers for Middle East while buyers from Russia and Lithuania in particular are up nearly 200% compared to 2012.

These are phenomenal figures and it seems that the opportunity for visa free travel within Europe is a very strong pull from those outside of the European Union. It will be interesting to see how prices fair in the short to medium term especially when the much anticipated recovery in the market eventually occurs. Will the Golden Visa impact be reduced? Will this be overtaken by natural demand from domestic and overseas investors?

Is the market over the worst?

One of the main problems with the Spanish property market is the fact that Spanish banks have been left with a raft of properties they don’t want. There have been rumours for some time that Spanish banks were looking to dump these properties at any price to get them off their balance sheets and attempt to put their own finances in order. Now, we have the Golden Visa which could and should offer Spanish banks a perfect opportunity to rid themselves of unwanted assets.

Quote from PropertyForum.com : “News that billionaire Bill Gates has acquired a 5.7% holding in Spanish builder Fomento de Construcciones & Contratas SA (FCC) has certainly caught the attention of property investors around the world.”

Over the last 12 months we have seen major difficulties within the Spanish property market with some holiday homes selling for less than 20% of their original asking price. While there is no doubt that the worst is over, there is also no doubt there is some way to go to get anywhere near the highs of 2008, before the US mortgage crisis.

Will overseas investors save the day?

Whether or not you agree with the Spanish government offering Golden Visa’s to those looking to invest in excess of €500,000 into Spanish property, there is no doubt it is having an impact. Wealthy investors from the likes of the Middle East, Russia and China are investing billions of euros into Spanish property and it is starting to have an impact upon prices.

The problem at the moment is one of confidence because even with the best will in the world nobody is 100% certain that the Euro crisis is over. We have governments within Europe introducing austerity measures which would normally kill economies but are required to get government balance sheet back in order. We have unemployment in areas such as Spain currently double that of the likes of Latin America which illustrates the lack of economic activity and the ever-growing burden on the benefits system.

It will be interesting to see when “natural” investor attention increases towards the likes of Spain and Portugal (where the government has also introduced a similar visa system) and whether indeed the relevant governments look to close the door on the Golden Visa in the short to medium term. You could argue this change in the visa process is manipulating the system, is attracting unnatural demand but the fact remains it has created a springboard from which the Spanish property market, and eventually the Spanish economy, can use to move on to better things.