In the last four years alone, foreign investors have expended EUR€29,000 million into Spanish brick and real estate. Without a doubt, real estate has managed to capture more foreign investment than any other investment opportunity in Spain. For example, the logistics sector (which isn’t linked to real estate) has had a combined 11.3 percent investment from foreign parties, and the supply of electricity and gas has achieved a mere 10.2 percent.
the most attractive sector
Between the years 2014 and 2018, 20 percent of all foreign investment in brick-related activity was invested in Spain. Unsurprisingly, real estate is still the most attractive sector for foreign capital. However, since 2015 (when figures reached a record high of EUR€8,659 million), investment has started to fall, even though the first half of 2019 saw a substantial EUR€1,069 million registered, according to ABC.
This data reflects the historical importance of brick in the Spanish economy. But, in recent years, this trend has begun to change, and foreign investment is declining. Only two years ago (in 2018) for example, Spanish brick became a second priority investment option for internationals, and during the first half of 2019, it dipped even lower to third place.
The 2019 decline
This decline is based on two main reasons. The first is related to profitability. During Spain’s financial crisis, investing in brick and mortar properties ensured large returns. After all, property prices plummeted to new lows, and the forecasted figures predicted a slow but steady economic recovery. Unfortunately, in the last year or two, this steady incline has begun to reach a ceiling and consequently, the opportunity for fast returns and high profitability has stalemated, leaving foreign investors looking at more attractive markets.
Political conflict with Catalonia
In addition to the economic outlook, the Spanish brick sector has also suffered a loss from outside investment due to Spain’s political turbulence. Within the space of six months, for example, Spain went through two general elections and, for more than a year, the country went ungoverned. Pair this problem with the rising tensions between Spain and the autonomous community of Catalonia, foreign investors are beginning to distance themselves, claiming uncertainty across the country as a major reason for looking elsewhere.
The issues caused between Catalonia and Spain, however, has resulted in more investment opportunities in far-away areas like Madrid, which offer investors more stability and the opportunity for a high return on investment. In fact, between 2016 and 2018, foreign investment in Madrid’s real estate sector shot up 133 percent. In Catalonia, however, it collapsed by 61 percent.
All is not lost, though. Other parts of Spain like Valencia are beginning to attractive foreign investment opportunities, and the market will begin to climb again. As the old adage goes: Time is the driver of change. In the case of Spain, we expect that change to be positive.