The demand from foreigners currently holds the evolution of the price of holiday homes in Spain. Neither the rapid rise in interest rates nor the more complex economic context, especially in northern Europe, seem to have been fatal obstacles to the Spanish coastal real estate sector for the moment. The vacation home 6.3% became more expensive in the last year, according to data compiled by the Tinsa appraisal company. The average price of the second home segment stood at 2,550 euros per square metre, 35% above the first home market. But in the real estate sector, the averages used are used to describe trends but not to assess the specific situation of an area or the price of a specific property. In any case, housing on the Spanish coast became more expensive by 4.1% year-on-year in the first quarter of 2023, compared to 3.5% the previous year, according to Tinsa, while a price stabilization trend is already being observed in the general residential market from the end of 2022.
In 12% of the areas, the technicians tinsa there are signs of overheating, understood as a particularly intense increase in prices and/or trading in a short space of time. This is the case in the Balearic and Canary Islands and some coastal sections of Barcelona (Garraf coast), Tarragona (between Cunit and Altafulla), Valencia (between Canet d’en Berenguer and Alboraia) and Alicante (between Denia and Benissa).
Higher prices than in 2007
The reason must be found mainly in a demand from foreign buyers who continue to see the Spanish market lower prices than in their country of origin and compelling future prospects (no devaluations in sight). On the Mediterranean coast, one in three homes sold is to foreigners. According to the study ‘Housing on the coast 2023’ released this Monday, in up to 14 Balearic municipalities the average value is already above the 2007-2008 period. On the island of Ibiza, four enclaves exceed it by more than 25%. International demand has exceeded the levels prior to 2020. The presence of non-resident buyers on the Mediterranean coast is increasing, surpassing resident foreigners.
The data corroborate that the second residence of the Spanish coast registered in the first quarter of 2023 an activity equal to or higher than that of the first quarter of the previous year, driven by a greater intensity of sales by foreign demand, which has recovered the levels prior to 2020. Tinsa’s study combines prices in 250 municipalities on the Spanish coast from Tinsa’s appraisal activity with the results of a survey of technicians who regularly work in those areas. The report divides the Spanish coast into 54 zones, each one made up of a group of coastal municipalities from the same province. These areas are also added to four main coasts or slopes (Mediterranean, Atlantic, North and islands) to observe the different dynamics to which they are subject.
60% more on the seafront
The conclusions serve to draw a global panorama and coherent trends. “The prices of holiday homes on the coast continue to show a upward trend that contrasts with the price stabilization trend observed since the end of 2022 in the general residential market”, explains Cristina Arias, director of Tinsa’s Research Service. But the so-called coastal areas also incorporate elements that influence the prices of each property. A home on the seafront has a price that can reach at 60% more than the same on the second line or after a visual or physical obstacle (road, train track). Having a nearby train station, shops or a park can increase the price. An isolated house, own garden, swimming pool. .. any element modifies the valuations. But adapting to the needs of the buyer is not so easy. For Arias, the second residence also incorporates a profile of “greater purchasing power and, therefore, less affected by the impact of inflation and the mortgage financing more expensive than an average first-home buyer”. Therefore, demand may be more resistant to rising interest rates than for first-homes, but the increase in prices in past years has been minor.
The average growth in the last five years in the group of coastal municipalities has been 2.8% (compared to 4.3% nationally), led by Islands (+3.9%), where competition for space is higher, and milder on the north coast of Spain (+1.8%). In some specific points on the islands, Valencia and Alicante, a certain overheating of demand has been detected, “which in the current European context of erosion of the purchasing power of households in the face of inflation and the increase in the cost of financing should moderate”, recognize Tinsa experts.
In the Balearic Islands, the upward pressure on prices is structural in nature, derived from a high concentration of sale of foreigners (with higher salaries than the locals) and a productive model focused on tourism, which encourages investment for vacation purposes. This framework, together with the limitation of space due to its geographical condition as an island, restricts the offer, increases competition and puts pressure on prices. In several municipalities of the Balearic archipelago, the average value of housing exceeds the level of 2007 by more than 10%, or even by more than 25%.
where they climb more
The analysis by provinces reveals that the highest year-on-year variations in house prices in the last year (Q1 2022 vs Q1 2023) are located on the coast of the province of Malaga (+7%), Granada (+6.8%) , Guipúzkoa (+6.2%) and the Balearic Islands (+5.8%). 91% of the 250 municipalities on the Spanish coast analyzed in the report increased the average price of housing (1st and 2nd residence) in the last year, according to the Tinsa appraisals. The largest increases, above 10%, are located in the Balearic Islands (Manacor, Ses Salines, Llucmajor, Es Mercadal and Campos), the Valencian Community (Canet d’En Berenguer, Sagunto, Meliana and L’Alfàs del Pi) and Andalusia (Motril, Algeciras, Malaga and Manilva). Only four municipalities reflect year-on-year decreases in value of more than 4% in the first quarter statistics: Orihuela (-5.6% year-on-year), Deltebre (-4.7%), Calviá (-4.7%) and Gandía ( -4.5%).
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In terms of absolute value, the higher price per square meter of first home and second home It is located on the island of Ibiza (Sant José de sa Talaia, Santa Eulària des Riu, Ibiza and Sant Antoni de Portmany) and in Calviá (Mallorca). If the current price level of housing is compared with the maximums reached in the first decade of the century, up to 14 municipalities, all of them in the Balearic Islands, are at historical maximums, above the references for the 2007-2008 period. The enclaves that more easily exceed this reference are Santa Eulària des Riu and Sant Josep de sa Talaia (29% above), and the municipalities of Sant Antoni de Portmany and Ibiza (+26%). In very exclusive isolated homes on the coast of the island of Majorca, the unit price can be as high as 11,000 euros per square meter.
The house sales statistics of the Ministry of Transport (MITMA) reflects that in 2022 287,313 transactions were registered in coastal areas (first and second residence), which is 10.2% more than in 2021. Demand was driven by the Islands (+19.6% annual) and the Mediterranean Coast (+11.4%), while the Andalusian Atlantic section and the North Coast registered variation rates close to zero. Specifically, in 2022 sales increased in 15 of the 22 coastal provinces and contracted in 7. The increases are intense in the Canary Islands and Alicante, above 26%, followed by Girona, Granada and Malaga. The greatest adjustment occurred in Lugo (-18%) and more contained contractions were recorded in the coastal municipalities of the provinces of Huelva, Guipúzcoa, Cantabria and Cádiz.