Exchange rates and golden visa encourage overseas buyers in Spain
21st May 2015
|Currency exchange rates are encouraging even more foreign buyers back to the Spanish property market and this is reflected in increased sales, especially in popular areas.
New legislation to relax the requirements for Spain’s golden visa which allows non-European Union buyers to gain citizenship if they invest in the real estate market is also set to encourage more buyers from overseas.
In the Balearics the currency rates are currently by far the biggest influencing factor in the property market, according to Alejandra Vanoli, managing director of Mallorca Sotheby's International Realty.
‘Thanks to negative interest rates, affluent Germans are currently paying to keep their money in the banks and some would rather see it being put to good use in real estate investment. Mallorca is an obvious choice, German tourists have been coming to the Island for more than 50 years and represented 38.6% of all foreign arrivals to Mallorca in 2014, they have their own weekly newspapers, radio station and Air Berlin dominates the Airport. There is a strong bond,’ she said.
She explained that with the British pound is at a seven year high against the euro, a two million euro property would have cost £1.67 million a year ago, but just £1.44 million today, some 14% more affordable.
Swiss buyers are in a similar situation. The Swiss Franc soared when the National Bank abandoned its euro peg in the middle of January and a property costing 2.54 million Swiss francs a year ago would now cost 2.11 Swiss Francs, a saving of around 17%.
The golden visa, which was introduced in September 2013, has seen 530 foreigners granted a visa so far with the majority, some 490 people, doing this through putting at least the minimum of €500,000 into property. Most of the property investors have been Chinese, Russian or Arab with business entrepreneurs coming largely from the United States and it has earned the Spanish economy an estimated €700 million so far.
Previously the visa was granted to the applicant, their spouse, children under the age of 18 and disabled children of any age. This has now been extended to unmarried couples, economically dependent relatives and children of any age.
Also, while the economic criteria remain the same, the path has been made smoother with applicants able to start the process upon arrival in Spain rather than applying from overseas. The visa will also be given within six months even to those who haven't formalised a property purchase, provided they've signed a contract and paid a deposit.
‘We are expecting more non-European purchasers but at the moment Mallorca is still very much dominated by British buyers who have been coming en masse since the 1960s, the Germans, and the Swedish who also have a long standing love affair with the Island,’ said Vanoli.
‘Mallorca is reported to be the most popular holiday destination for Swedes in 2015. Like the Germans, they have a Swedish language e-newspaper and key royal family members have a home here,’ she added.
On the Spanish mainland it is Marbella on the Costa del Sol that is proving popular. Indeed, the latest figures from the Spanish National Statistics Institute have shown that the sales increased by 28% in 2014. The increase means that property sales in Marbella are now 12% higher than their 2007 peak.
It has been busy on the sales front in Marbella for the last three years, according to Christopher Clover, managing director of Panorama Properties. ‘Marbella's charms are plentiful. The coastline in the region is simply stunning and the cosmopolitan atmosphere of the town offers something for everyone. The streets of the old town provide a real flavour of the true Spanish style of architecture, intermingled with tiny shops and restaurants whose exteriors are covered with blossoming Bougainvillea throughout the summer months,’ he explained.
‘Marbella is one of the Mediterranean coastline's most desirable cities when it comes to owning a second home or a retirement property, as it's great year-round weather provide it with a 12 month season. Demand is strong, especially from buyers living outside of Spain. British buyers adore the resort and we see a lot of buyers from Scandinavia, Germany, France and all of the European countries. Marbella really does have everything that the perfect vacation resort needs, making it the ideal place for buyers to own their dream second home,’ he added.
Spanish banks are predicting a positive year for Spanish property but warning owners not to expect prices to reach their peak levels in the short to medium terms. A report from BBVA, Spain’s second biggest bank, says that improved expectations for economic growth and improving financing conditions means that sales will grow alongside a modest improvement in prices.
And a report from Santander says that consolidation is possible this year thanks to increasing credit, and price growth as 60% of Spanish provinces, 32 out of 50, already have house prices that are on the increase, or at least have bottomed out.
Interest rates are expected to stay at historic lows and a steady growth in demand will boost prices but it warns that the Spanish property sector will never be as important to the economy as it was before the crisis.