Over the last year, the purchase of luxury homes by foreigners has reached new heights. Despite the epidemiological situation and the changes brought on by Covid in both everyday life and the property sector, the high-end home market continues to grow.
And according to the latest research, everything points to the situation remaining the same. The prime real estate sector is a key investment vehicle for ultra-high-net-worth individuals– those whose net asset wealth totals at least US$50 million. And it’s estimated that this year, 25% of them will choose to invest in real estate.
The high-end of the property market held its ground better
In a year marked by the pandemic, research has come to the conclusion that, at global level, the residential property sector has been the best performing investment. In homes alone, investment was worth US$88.900 billion. This figure, although less than the US$124.300 billion of the previous year, did not see such as sharp drop as did investment in offices, retail, hotels and industrial and logistical premises.
And n amongst these results, one stands out ahead of the others for growth: the prime sector in residential real estate where prices went up 1.9% last year.
Sales of high-end homes on the Spanish market reflect the global trend and continue to increase. During the toughest months of the pandemic and lockdown, both prices and demand remained stable, although the latter has since recovered and returned to pre-Covid levels.
Furthermore, according to the latest forecasts, in 2021 Madrid will be the Spanish city where luxury property prices go up most, with an increase of 3%, ahead of Barcelona with a 2% rise.
To understand the reasons behind the growth of the luxury real estate market despite the pandemic, several factors come into play:
- According to statistics from property registries throughout Spain, property prices continued to rise.
- In 2020, the trend emerged for larger homes with more space and privacy after lockdown. 52.2% of sales were of apartments with more than 80 square meters, 2% higher than the previous year.
- Other significant factors include low mortgage interest rates, at their lowest ever in some markets, and changes in migration patterns.
Number of foreign buyers of luxury property in Spain rises
According to the Registrars Association 2020 Report on property statistics, almost 7% of buyers of luxury property in Spain were foreigners. This is the highest percentage since records began in 2013, the year that Spain started to offer the so-called ‘golden visa’, residential benefits for non-EEA nationals who spend more than half a million in euros on bricks and mortar.
However, golden visas do not appear to be the reason behind the higher number of foreign buyers of luxury homes because it is precisely EEA nationals who make up 65% of the total. (Although this is easily explained since border restrictions were much more severe for non-EEA nationals.)
The Registrars report also reveals the uneven share of foreign buyers in Spain. While in four regions (Extremadura, Castilla-La Mancha, Navarra and Galicia) there were no sales to foreigners at all, in the Balearics, one out of every four buyers was a foreigner.
Preferences in high-end homes
Mobility restrictions and lockdown caused by the pandemic have transformed preferences and priorities when choosing a new property. Buyers, particularly Spanish, increasing opt for homes located outside Madrid.
Areas such as the Costa del Sol have also seen a reactivation of the residential market with new clients who, thanks to the opportunities offered by remote working, look to work from home in surroundings that give them a higher quality of life. In fact, according to the Association of Businesses for High-end Homes, DOM3 – that has in the last year seen transactions in excess of €200 million in the so-called Golden Triangle of Marbella, Estepona and Benahavís – the high-end home sector is an immune business activity on the Costa del Sol and able to withstand a crisis. The Costa del Sol has therefore emerged as a top destination to invest and live in thanks to the quality of life it offers, its temperate climate, cultural and culinary attractions and natural surroundings.
On the other hand, the lack of development land in large cities has led the high-end market to also look at property recycling. Industrial buildings or spaces are easy to buy and refurbish to create new homes. Many players in high-end real estate have opted for spaces like garages, farms, churches and even planes and trains to transform them into high-end homes and prime locations as is the case with the Tas Church, in Sopuerta in Vizcaya in the Basque Country.
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