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Alicante Reports: How the Most Popular Region of Spain Survived the Pandemic

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If someone expects a significant price reduction, they will be disappointed. But the number of transactions involving foreigners has really decreased, which is a 'no surprise'. But local buyers have become more active. The most popular Spanish province of Alicante has published the results of the real estate market in the crisis year 2020. And for Prian they were commented on by the owner of the Costa Real company, Petr Andrushevich.

The Notarial Association of Valencia has released a report on foreign buyers of real estate in the province of Alicante for the period from 2010 to 2020. Despite the predictability of some trends, there are also surprises.

There is a decline in sales to foreigners. But it has begun before 2020

Since 2010, the number of properties sold in Alicante to foreigners has grown steadily. In 2010, "non-Spaniards" completed 8.5 thousand transactions in the region, and in 2018 – almost three times more (23 thousand). That year was the peak of sales over the past 10 years.

In 2019, the number of sales to foreigners slightly decreased by 4%. The Notarial Association noted this decline even can be explained with instability in Catalonia, rising unemployment and tougher conditions for issuing mortgages. We can't tell how the situation could develop under normal conditions, because then  the year 2020 has come...

 Colegio Notarial de Valencia y elaboración propia
Purchase and sale of residential real estate to foreigners in the province of Alicante

Last year's decline was much more noticeable and more predictable. Compared to 2019, sales decreased by 31% (or 6,820 transactions in absolute numbers).

However, given the serious restrictions on movement around the world, and the most difficult (including in the moral sense) situation in Spain last spring, and this result is very good. In 2020, the number of apartments and houses bought by foreigners was at the level of 2013-2014.

Who was buying property in Alicante in 2020?

Russians are losing ground, Belgians are holding out the best...

In 2020, Russians bought 41% fewer properties in Alicante than in the previous year. Nevertheless, they concluded 750 transactions under quarantine and closed borders.

Peter Andrushevich, Costa Real: "I expected that the decline in the Russian direction would be about 20%, but in fact it turned out to be minus 40%. And yet Russians were not allowed to enter Spain all year, and 750 sales were registered. Perhaps a significant part of the transactions on the Costa Blanca were made by residents, those who live here permanently, or those who could come to Spain even during the pandemic. That is, had a residence permit."

In 2020, other foreigners bought less in Alicante: Norwegians (down 58%), Chinese (-48%), Irish (-42%), Italians (-32%), Germans (-24%).

Colegio de Notarios de Valencia
Purchase and sale of residential real estate to foreigners of the main nationalities in the province of Alicante

However, citizens of Ireland and China have not been particularly active in buying in Alicante before: in 2019, 458 and 246 objects, respectively, a year later – 262 and 128.

Belgians performed better than the rest – a decline in sales of only 13.7%, 2,105 objects changed owners. This is largely due to the activity of people of retirement and pre-retirement age who want to move to a country with a more comfortable climate.

Petr Andrushevich, Costa Real: "One of the reasons for the high demand among the Belgians is the permission of their government to withdraw the accumulated part of the pension early. People do not have to wait until they are 67 years old, but were able to collect money at 55-60 years old and, for example, buy a property in Spain. Belgian buyers have been active on the Costa Blanca for 4-5 years, they are its "breadwinners". Non–French-speaking Belgians from the northern part of the country (with the exception of Brussels) buy the most. If it weren't for them, there wouldn't be such a construction boom on the Costa Blanca".

Demand have fallen, but sellers managed to earn money

Despite the decline in the number of transactions, the average value of purchased real estate has increased by more than €10,000 since 2019. At the peak of sales in 2018, it was about €139,000, in 2019 – already €144,000, and in 2020 - €154,000.

The situation was obviously influenced by two factors: the general increase in prices, provoked by an attempt to balance the economic situation, and the demand from buyers whose income was less affected by the crisis.

Colegio Notarial de Valencia y elaboración propia

Average amount of transactions in the province of Alicante and interannual variation (foreigners)

Petr Andrushevich, Costa Real: "All the talk that the pandemic will lead to a drop in real estate prices turned out to be untenable. Prices have held up even in 2020. At the same time, developers planned fewer new projects. When the borders are opened, all the new buildings available on the Costa Blanca will immediately be dismantled by the surging wave of buyers."

These figures look even more interesting broken down by the country of origin of buyers. Almost all foreigners have increased the budget they invest in real estate in Alicante. Only the Chinese distinguished themselves, who reduced the average check by 39% at once. 

Colegio Notarial de Valencia y elaboración propia
Evolution of the price of the purchased realty by nationalities in the province of Alicante and interannual variation

Petr Andrushevich, Costa Real: "In general, the property in 2020 was bought by wealthy people. These were clients who at some point realized that the money needed to be invested somewhere. The main driving force for many of them was the "golden visa". Most of the buyers didn't even come to the deal. I can confirm by my own example: I have never communicated with some customers, only with their representatives".

The main preferences - apartments on the secondary market

Historically, many real estate transactions in Alicante are made by foreigners on the secondary market. First, there are significantly fewer new buildings on the market. Secondly, because their prices are higher. But the trend is gradually changing.

Colegio Notarial de Valencia
Number of properties sold to foreigners in the provincefrom Alicante, 2010-2020. Secondary vs. Primary realty

Up to 2018, foreigners bought second-hand housing about six times more often than new buildings. And starting in 2019, interest began to slowly shift towards new housing, their share in the total number of transactions is increasing.

Interesting conclusions can be drawn based on the analysis of the structure of sales by the type of properties. As before, foreigners prefer apartments rather than private houses. Although there is one 'but'…

Colegio Notarial de Valencia
Number of properties sold to foreigners in the province of Alicante. Houses vs. Apartments

In 2020, sales of apartments and apartments declined significantly: they were bought by 35% (or 5,157 objects) less than in 2019. The decline in sales of private homes is more modest – only 23% or 1,663 objects. The obvious reason is the lockdown. All over the world, people with opportunities have wanted to escape closer to nature in order to have more space around them.

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What does all this mean for potential buyers?

Of course, it would be much easier to predict the future, if the last year was not overshadowed by the coronavirus' journey around the planet. Any statements about what will happen next, while reminiscent of fortune-telling on coffee grounds. Nevertheless, experts urge to rely on the available information to start acting decisively.

Petr Andrushevich, Costa Real: "Everyone still wants to go south. This can be seen even in the Russian market: people go to the Black Sea to relax and buy real estate. But now there are opinions: it turns out that everything in the Crimea and Sochi has become even more expensive than in Spain. So, as soon as the borders are opened, the deferred demand will immediately make itself felt. People want the sun, warmth and a high quality of life. The demand from Europe, in addition to simple human desires, will be driven by another important factor: the desire to invest money sooner, since it quickly devalues, and real estate does not".

Advice:

If you are preparing to invest in Spain in the near future, then I would recommend to make  a transaction remotely through trusted sources (a realtor, developer, friend). There is no point in delaying, real estate will not become cheaper. Vaccination is in full swing, we are coming out of the doldrums.

Quoting conditions of Prian.info materials

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Tags: Spain, Market Analysis, Real Estate, Buying procedure

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