Foreign buyers are increasingly more attracted to houses on the market in Spain because of the possibility of having a second home in a warmer area that will only cost more or less half or even a third of the original asking prices that were seen in 2008.
The Public Works Ministry stated that 8,803 houses were purchased by foreigners in the third quarter, a jump of 18 percent from a year ago. This is consistent with the growth in this area in the last five quarters.
In the first and second quarters of 2012 we saw an increase of 16.2 and 15.3 percent consecutively. This is great for the market because of the vast quantity of homes sitting around unsold since the crash in 2008, and the government is taking advantage of the situation by promoting sales and tax improvements to non-residents and foreign buyers.
Resident cards for foreign buyers seem to be working
To target the Chinese and Russian markets, mainly, the government is considering giving residence cards on a temporary basis to non-residents that buy homes worth more than 160,000 euros. Also, we have experience a growth on Egyptians placing inquiries after being attracted by the news. So, it seems that the new measure encourage overseas buyers.
The most Desirable areas
The most desirable areas for foreigners are Girona, Barcelona, the Balearic Islands, Malaga, and Alicante, which is where we have seen the highest concentration of purchases, however, the Ministry did not give out a list of where exactly the foreigners are coming from for the third quarter.
Still Not Enough
We still saw an overall decline in sales between July and September of 1.17 percent (75,642 homes in total) due to a seven percent drop in the two quarters before. Homes being resold performed a bit better, seeing an increase of 1.7 percent from a year ago, but new houses didn’t fare as well, experiencing a drop of 6.7 percent. All in all, in the past year, we saw a 5.1 % (229,351 homes) drop from the year before.
New regulations in 2013
For one, mortgage tax benefits for families have been taken away, and the VAT increase on new homes at the start of 2013 did not help a market that has been in a slump for 5 years already. In addition, Spain’s unemployment rate is a staggering 25%, and as banks try to recover from the mistakes made during the boom, they have increasingly more difficult credit conditions for potential buyers
This all demonstrates to us that even though home prices keep falling, the market is still not really recovering due to these other pressing factors. The Ministry stated that overall this drop was the worst since the last quarter of 2010.
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