The sudden and significant impact of the COVID-19 pandemic and the subsequent lockdown on all aspects of life has been felt particularly acutely in Spain. The Spanish real estate market, one of the most important sectors of the economy, was paralysed in mid-March when the Spanish Government decreed the state of alarm and subsequently the cessation of all non-essential activities, including construction work on hundreds of property developments. In addition, most conveyancing transactions have been put on hold until Notaries are allowed to resume their normal activity – currently, they can only proceed with urgent matters.
Before the crisis began, the Spanish property market was in a relatively healthy state and projected to maintain its 2019 value, with only a slight variation of between 1% and 2% expected in 2020. The scale of the impact of the virus on economic activity has meant that the Spanish Valuation Society anticipates a virtually complete halt in property sales during April and May, and predicts that transactions that may fall by 15%-20% in the short term, and up to 40%-45% in the mid-term. However, they expect the demand will recover towards the end of the year.
Many experts are convinced that, as demand drops, prices will follow, including those in the rental sector. In both markets, the decreases of between 6.5% and 13.5% are anticipated, depending on the area concerned. The greatest impact is expected where there is a higher unemployment rate, less economic capacity, less industry and a greater dependence on tourism. As a result, buyers may find opportunities to purchase property at low prices. The extent of any drop in prices will largely depend on how quickly the situation returns to normal – the longer the economic slowdown persists, the greater the fall in price is likely to be.
The coronavirus pandemic presents an unprecedented challenge and the obvious priority is to deal with the ensuing public health crisis. The economic implications will be the next issue to tackle and we are already seeing many industries adapting their practices in order to continue providing services as far as is possible. Estate agents in Spain are finding innovative ways to keep customers interested by using technology. Virtual viewings are increasing as those seeking properties continue their search during the lockdown period. This allows prospective buyers to begin the process of finding a property immediately which will likely help increase the pace at which the market recovers when the current restrictions are eventually lifted.
However, it’s probable that the investment will be severely limited for the next few months and the ongoing uncertainty means that the recovery will not be immediate. The length of the lockdown and the associated limitations on the movement of international buyers, coupled with the avoidance of a second wave of infections will be crucial in determining exactly when it can begin.
