The Spanish Elections and the Property Market

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The Spanish Elections and the Property Market

July 06, 2016

 Is this a good time to sell your property in Spain? In this article we discuss everything you need to know about the Spanish property market, and we begin with a look at the recent events in Spanish politics.

2016 has been a strange year for Spain. The country hasn’t had a government in power since the last elections of December, 2015, and now that the results of the new election held on June 26 are out, we are still nowhere close to having a government in Spain.

Mariano Rajoy, the acting Prime Minister of Spain and the leader of the Spanish People’s Party (PP), Mariano Rajoy, has staked a claim form a new coalition government in Spain. His party, the People’s Party has once again emerged as the top party in the election, much like last time, but have fallen well short of a majority, again, just like last time. But it does look likely that they will be able to form the government with help from other parties.

The biggest change in this election is that the two party system in Spain is effectively over with the two new political formations, the anti-austerity Podemos and the centrist, business friendly Ciudadanos having overshadowed the Spanish Socialist Workers’ Party (PSOE), which been a dominant force in Spanish politics since the 1970s.

 The combined vote share of Spanish People’s Party (PP) and Spanish Socialist Workers’ Party (PSOE) which was over 85% for much of Spain’s recent history, has now fallen to 55%. The rise of the smaller parties has been attributed to the growing public anger over corruption in high places.

 Podemos has come third in the election, repeating its performance from last year. This has calmed down investors, who consider Podemos to be anti-business.

Another fallout of the election, which will have grave consequences for the property market in the country is the growing demand for independence in Catalonia.

Here’s a table of the results of the Spanish General Elections, 2016.

 

 

Party

Vote

Seats

Votes

 %

±pp

Won

+/−

 

People's Party (PP)

7,906,185

33.03

+4.32

137

+14

 

Spanish Socialist Workers' Party (PSOE)

5,424,709

22.66

+0.66

85

–5

 

 

[show]United We Can (Unidos Podemos)[a]

5,049,734

21.10

–3.39

71

±0

 

 

Citizens-Party of the Citizenry (C's)

3,123,769

13.05

–0.89

32

–8

 

Republican Left of Catalonia–Catalonia Yes (ERC–CatSí)

629,294

2.63

+0.24

9

±0

 

Democratic Convergence of Catalonia (CDC)[b]

481,839

2.01

–0.24

8

±0

 

Basque Nationalist Party (EAJ-PNV)

286,215

1.20

±0.00

5

–1

 

Animalist Party Against Mistreatment of Animals (PACMA)

284,848

1.19

+0.32

0

±0

 

Basque Country Unite (EH Bildu)

184,092

0.77

–0.10

2

±0

 

Canarian Coalition–Canarian Nationalist Party (CC–PNC)

78,080

0.33

+0.01

1

±0

 

Zero Cuts–Green Group (Recortes Cero–GV)

51,742

0.22

+0.03

0

±0

 

Union, Progress and Democracy (UPyD)

50,282

0.21

–0.41

0

±0

 

Vox (Vox)

46,781

0.20

–0.03

0

±0

 

Galician Nationalist Bloc–Us–Galician Candidacy (BNG–Nós)

44,902

0.19

–0.09

0

±0

 

Communist Party of the Peoples of Spain (PCPE)

26,553

0.11

–0.01

0

±0

 

[show]Parties with less than 0.1% of the vote

87,649

0.37

0

±0

 

 

Blank ballots

178,521

0.75

±0.00

 
 

Total

23,935,195

100.00

 

350

±0

 

[Source - https://en.wikipedia.org/wiki/Spanish_general_election,_2016#Overall]

One expects Rajoy to be the Prime Minister yet again with support from Ciudadanos, PSOE, and other smaller parties, as everybody agrees that Spain cannot afford to have a vacuum at the top once again. The need to form a government has never been more urgent.

Indeed, the last 6 months have created some sort of a policy paralysis in Spain during which no major decision was taken by the central government – because there was no central government to begin.

2015 saw the Spanish economy get back on track after a prolonged spell with recession. The austerity measures had their effect and the country has since staged a smart recovery. The property market had been doing very well indeed, so the uncertainly caused by the political situation could have been best avoided.

 The political uncertainty has the potential of undermining the economic recovery and could affect the property market as well. The GDP forecast in Spain for 2016 is 2.7 per cent, which is the highest it has been since the start of the 2008 recession. 

Unemployment in Spain is at 21 per cent with over 60 percent of young adults under 24 still to find a job. In fact, this is the highest in Europe after Greece.

 But it is the growing tension between Madrid and separatist leaders in Catalonia that is expected to have the greatest significance for the property market in Spain. The support for Catalan independence has never been higher than it is now, with separatists forming the provincial government in Catalonia and asking for a referendum like the Scottish referendum that was held in the UK recently.

 

Keeping this in mind, let’s quickly make a few predictions for the Spanish property market. Predictions are hard to make in Spain, where the housing market is famously turbulent. But generally, we do believe that Spain’s worst years are behind it and there are good reasons to be cheerful – despite the political uncertainly in the country.

 The property market in Spain is healthy again – No new housing bubble in prospect – The data available to us indicates that transactional activity in the Spanish housing market is at a high – there are more people buying and selling than before and the rate of mortgage approvals has also gone up by 18.7 per cent over the last 12 months.

This indicates that growth is returning to the housing market in Spain. The data available from the registrars and notaries indicate that the Spanish property market is still a long way to go from the boom years of 2007 and all talk of a housing bubble is premature. There are as many buyers today in Spain as sellers, and this is an excellent sign indeed.

 Steady economic recovery – The Spanish property market is dominated by overseas investors, and for overseas buyers, the national economic indicators play a huge role in influencing their decisions. Indeed, 18% of property buyers in Spain are foreign nationals and in regions such as Alicante, at least 50% of the buyers are foreigners.

 So it is important for the Spanish economy to do well for foreign investors to be interested in Spain.  All indications are that the economic recovery in Spain, which began in 2014 has continued. The country is in a very good state economically. The GDP is currently growing at 3.4% year-on-year, which is twice as much as the average in the Eurozone. This is impressive. 

 What about the other economic indicators? Just the GDP alone is not enough to tell you the whole story. The other indicators in Spain are equally encouraging. As said earlier, Spain has had very high unemployment stats over the recent past. This is finally coming down. Inflation is down as well and the cost of living is finally becoming tolerable again. So we have a good situation in Spain, there are more jobs available than before and the purchasing power is higher than ever.

Other signs that indicate that all is well in Spain – One of the best ways to find out whether the Spanish economy is on track or not, is to check the international arrivals at the airports in the country. That’s because tourism is the main business in Spain and more foreign tourists arriving means good news for the national economy. 2015 was an impressive year for the Spanish tourism industry. A record 68 million foreign tourists visited Spain last year. 2016 has been pretty much the same. The airports in Spain are packed with foreign tourists arriving from several different parts of the world, especially from the UK and Germany.

 The Brits are back in Spain, but for how long? – While there is a lot of talk about Chinese and Russian property buyers and there is no question that wealthy buyers from China, Hong Kong and Singapore are today buying more Spanish properties than ever before, it is the British buyers who make all the difference to the health of the Spanish property market.

 The recent strength of the real estate market in the country has been attributed to the British comeback in Spain, as more Britons have chosen to retire in Spain and enjoy the laid back lifestyle that country provides. There are over a million British expats living in Spain.

The recent Brexit referendum in which Britain voted to leave the European Union may present a stumbling block to this, however. This is an unexpected event for the Spanish property market, and something that nobody really expected.

Nobody quite knows whether there will be a substantial impact on the British interest in Spain following Brexit, but early indications are not good. Britons will now have lower buying power than before because of the falling value of the sterling and may postpone their purchase of the Spanish villa that they have always dreamed about.

Also, one wonders if there will be any change in the property buying process for British buyers now that the UK won’t be a part of the European Union for too long.

 Foreign Buyers of Spanish Property – Who is Buying in Spain and Where?   

Foreign buyers have been more dominant than Spanish buyers in the Spanish real estate market. Data available from the notaries in Spain reveals that the number of non-Spanish buyers who have purchased properties in Spain grew by 12.9% in 2015. Foreign buyers now account for 20% of all property transactions in Spain.

A total of 76,780 homes were sold to foreign buyers in 2015, out of the 383,987 homes that were sold nationally in Spain. British buyers accounted for 20.6% of all non-national purchases. The British interest grew by 37.7% over the last year.

French buyers accounted for 8.8% of all properties sold to foreigners, closely followed by Germans at 7.5%, Belgians at 5.7% and Italians at 5.3%. Romanians accounted for 5.3% of homes sold to foreign buyers, an increase of 59% over the earlier year. The interest from the United States remains as high as ever

Andalucía attracted 20.5% of all property purchases made by foreign buyers. Valencia attracted the most number of foreign buyers at 27.6% of sales. Catalonia, of which Barcelona is a part, accounted for 15.3% and the Canaries attracted 10.1% of non-Spanish buyers.