In this article I look at how the Corona virus might impact the real estate market in Spain. How will Corona impact property prices? What if you want or need to sell? Will Covid-19 create real estate investement opportunities as some other crises have done?


In today’s information-overloaded days, my purpose is to offer you the insights and implications that matter, as an economist and from my hands-on experience as real estate advisor for foreigner buyers in Spain and as a professor real estate at Universidad de Barcelona, so that you can take the best and informed decisions for your situation.

I will unveil below what I think will be the 7 important factors that will impact 2020 in terms of the property market in Spain. In a next article I will expand separately on specific implications for buyers and sellers.

1. A crisis, but very different from the 2008 financial and real estate crisis  

A lot of people make the quick assumption -and post corresponding statements on social media-, that Covid-19 will trigger the same effects on housing as the crisis from 12 years ago did. Those people basically remember that property prices in Spain dropped by around 40%. That was a bubble. Today both the property and the financial market are a lot healthier, the debt situation of owners is better and the interest rates are historically low.

There is no reason to expect any similar price drops as a result of Coronavirus. But the economy is de facto in shutdown mode, recession looms and even deflation would not surprise me.  As mentioned in my previous article “5 Factors that Determine the Real Estate Market in Spain”, the property market is directly depending on the health of the economy.  

Comparing both crises in terms of impact on property prices, is an error that can lead you to wrong decisions that you might regret for many years.

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2. What to expect in 2020 for the Spanish property market

Will prices go down? Yes, for sure! And there will be less transactions, less buyers and less sellers. Sellers will suffer more than buyers and the “costas” will face very challenging times. Prime locations in the larger city will attract money. Many real estate agencies will disappear. An opportunity will exists for those buyers that look beyond the current crisis and investors will become younger.

Buyers and sellers, you will have to adjust to the new situation.

3. Forget your reference points 

In a timespan of only a few days, real estate buying & selling activity has fallen to basically 0%. This never ever happened before! We can expect that this activity will pick up again shortly after the improvement of the Corona situation, but…

Things will be different! If let´s say in January you had confident knowledge of the property market and prices on the Costa Blanca or in Malaga, that might lead you to taking a bad (or at least suboptimal) decision in June. Understanding of the new situation and adapting your strategy to it is crucial.
Forget your reference points! 

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4. The impact will be harder for sellers than for buyers.

Some sellers will wait and see and other sellers might simply take their property off the market if they are not in a rush to sell. This will reduce transaction volumes.

But economic recession and uncertainty will equally urge numerous owners to sell and they will have to adjust their price expectations. While a buyer or investor can wait, people, families, investors or entrepreneurs that need money in the short term for personal or business reasons, will have to sell non-essential assets and cannot wait. They will first sell their second residence if they have one, or apartments that are being rented out, as both are not essential.

With less buyers on the market and a larger portion of opportunity-hungry buyers, sellers will have to adjust their asking prices. The problem is that most owners think that their property is a great deal better and therefore worth more than their neighbor’s or friend´s property, while actually it isn’t. If you need to sell, face reality and take advice, it will limit your exposure, because you may lose your chance to sell and you probably won´t have a second comparable chance this year. Remember that in Spain the general rule that agencies use to value your property is asking you this question: “For how much would you like to sell?”.
Common sense please!

5. Trapped investors in need for a Plan B 

Spain counts a large number of investors, many of them expats that have over-confidently speculated with buying, renovating and selling apartments. They currently hold one or more properties and don’t find an exit on the market.

If you are in this situation, drop your Plan A and move to a Plan B or C. I have these conversations daily and I understand how worried you are. But I have to warn that you won´t realize your business case this year and the fix and variable costs are killing your business case. For you, selling today, even at lower or no margin is better than waiting till later this year. But be creative. Talk to your bank, renegotiate financing terms, or try to rent out the property in the meanwhile. But above all, don´t stick to your Plan A, don´t just wait if you need to sell this year.

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6. Corona will create temporary opportunities for solvent buyers or investors that look beyond the current crisis.   

Solvent does not mean that you need a massive pile of money in your bank account. It means that you have a stable job plus some savings, and therefore access to a mortgage. For sure, in Spain many expats belong to this group.

Also, the expat investors will become younger with people from 28-30 years old entering the market. Young people buy sooner during and right after a crisis. 

If you are solvent, you will be able to get an interest rate so low that you have never seen before in your life. And you can lock it in for 10, 20 or even 30 years (for the younger investors). What this means is that you pay the capital back to bank plus a very little extra of interests. Financial leverage at a nearly irrelevant cost.

Those buyers will be able to invest limited own funds (50-100k€), to buy an apartment at an excellent location, with upward future price potential, net positive monthly cash flows, and returns that a can be beyond 10% on their own invested capital.

And they will buy in emblematic central parts of the larger cities. Think Barcelona, Madrid, Zaragoza, Alicante, Valencia, Bilbao, Malaga…  They will be able to buy in area that so far were prohibitive and didn´t pass the tests in our excel sheets.

Opportunities yes, but they won´t continue forever and maybe even not in 2021.

I doubt that people with a need to sell will massively drop their prices publicly by drastically adjusting prices on platforms like Idealista. Important discounts will have to be fought for in a negotiation. And you have to find those properties first of course.   

7. How can Covid-19 impact property prices in Spain?  

Prices will probably initially, during the next weeks, remain relatively unchanged but then the difference between asking and deal prices will decrease and property prices will drop, slightly or more significantly, depending on the wow-factors of the property, the area and the urgency of the seller.

Spain on average might during the course of this year adjust around 10% downward. For Barcelona a price decrease in the range of 7% – 10% is possible while Madrid might drop a bit more. Holiday homes on the coasts are a totally different market segment, strongly driven by international lifestyle buyers. Holiday homes will now become more affordable, with fairer prices in many cases, but equally new caution for buyers is required.

When will this be over? A lot of people in the property sector are saying that we will be back to normal in a few months from now. One problem is that they can´t explain why they think that. Another is that they might mislead you in your decisions. The reality is that the extent to which the Spanish government and Europe (the ECB´s role is critical!) will be able to provide the companies with the so needed liquidity and the consumers with fiscal stimuli, will be decisive for the severity of the impact of Corona on the economy and on real estate. I expect the impact to be harder in the very short term and –if financial and fiscal stimuli will be put in place- we should see a positive growth curve in 2021. In terms of real estate, this is a very short window of impact. For instance if you think of buying: by the time you decide what to do, find the property you want to buy and complete on a purchase, we will be 3-6 months further.  

Concluding words 

There are many moving elements today and things can change, but I hope you find these insights useful. 

Finally, I recommend you all to use this confinement period to reflect on what is important to you and to plan for it, so that you are prepared to act with an informed mind and a realistic plan.

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MY OFFER TO YOU

From my end, I have decided that I will dedicate some of my own time to you during this confinement period, free of charge, to listening to your situation, tell you if your plans are realistic and what I would do

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Raf Jacobs is an economist specialized in finance, a member of the Board of Directors of the Spanish Association of Real Estate Buyer Agents, a former management consultant, and known from his radio shows and international seminars on the property market and buying in Spain. Raf is professor at University of Barcelona for the Real Estate Executive Program, and is the Founder & CEO of Inspire Boutique Apartments, a boutique buyer agent firm helping foreigners to find, evaluate and buy their dream property in Spain.
Originally from Belgium, Raf lives in Barcelona since 2001 with his wife and two daughters. In his free time you will find him enjoying a glass of good Spanish wine or behind his piano – or both. 




By Raf Jacobs. – None of the content, partially or in full, can be published or used in any other format without the written permission of the author.






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