Is it Still a Good Idea to Buy Property in Spain?

Are you thinking of investing in property in the land of Flamenco? Are you wondering whether you should make a purchase now or in the future? People have different understandings of market timing. The Spanish real estate agent you know might advise you that now is the opportune time to buy property, while your childhood friend from Madrid may suggest exercising more patience before making a decision.

At Investropa, when we create articles or update our pack of documents related to the real estate market in Spain, we rely on facts and data that are backed by evidence, not just opinions or rumors.

We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here’s what we found, which can help you decide whether it’s the right time to buy real estate in Spain. We hope you find this helpful!

How is the Property Market in Spain Currently?

Spain Offers Stability to Investors

If you want to invest in real estate, prioritize stability as it promotes property ownership, rental demand, and sustainable growth. Spain is very stable. The last Fragile State Index reported for this country is 44.4, which is an outstanding number.

Spain has a strong and diversified economy, and its government has implemented a series of reforms that have stabilized the country and made it an attractive destination for foreign investors. Additionally, the country enjoys a favorable business environment with a well-developed infrastructure and a competitive labor market.

Spain is Positioned for Growth in the Coming Years

According to the IMF, Spain will end 2023 with a growth rate of 1.5%, which is promising. For 2024, the figure we’re looking at is 2%. This steady growth might keep going since Spain’s economy is expected to increase by 8.4% during the next 5 years, resulting in an average GDP growth rate of 1.7%.

A moderate growth rate in Spain is positive for potential property investors, as it means that the market is not overheated and there is still potential for property values to increase over time. Additionally, a moderate growth rate indicates that the market is stable and not subject to sudden changes, providing more security for investors.

Spanish Business Owners Still Don’t Express Confidence in Current Market Conditions

Although the GDP forecast provides insights, it may not fully capture the local Spanish sentiment as it relies on external projections. The Business Consumer Index (BCI) is a metric that quantifies the confidence of business leaders in the economic conditions of the present and future. According to the Ministerio de Industria, Energia Y Turismo’s data, the latest Business Confidence Index value is 4 for Spain, which is quite low. Unfortunately, we’re on a descending trend. The score, 12 months ago, was at 8.

Business Confidence is not at its best in Spain. However, this does not mean the property market will crash. A low score often indicates a temporary period of uncertainty or caution in the business sector, which is a natural part of economic cycles. Therefore, it’s important to consider other metrics before deciding whether it’s the right time to buy property in Spain.

Spanish House Prices on a Steady Growth Path

Spain’s home prices have increased by 14.2% in 5 years according to Ministerio de Fomento. It means that if you had bought a villa in Marbella for $750,000 five years ago, then it would now be worth around $856,000. Recently, Spanish house prices have been growing slowly but surely. For a more detailed analysis of this trend, check out the evolution of real estate prices in Spain over the past few years. It’s a positive signal and a promising sign for those seeking a secure investment environment.

Spain’s Population is Declining and Getting Poorer

When you’re looking to buy real estate, population growth and GDP per capita deserve careful consideration because a growing population means more people needing homes, and a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time). In Spain, the average GDP per capita has changed by -1.1% over the last 5 years. It’s a bit concerning.

Rental Yields are Average in Spain

Rental yield is the annual rental income of a property divided by its price. According to Numbeo, rental properties in Spain offer gross rental yields ranging from 3.4% to 6.1%. This means that your income potential is relatively moderate.

In Spain, Inflation is Expected to be Moderate

Inflation is when prices rise, and things become more expensive. According to IMF projections, over the next 5 years, Spain will have an inflation rate of 12.0%, which gives us an average yearly increase of 2.4%. It means that Spain may face inflation in the near future. In such a situation, buying property now becomes an option to consider.

Conclusion: Is it a Good Time to Buy Real Estate in Spain?

Looking ahead to 2024, investing in property in Spain presents strong potential, supported by several compelling factors. The country’s remarkable stability provides a secure foundation for investors, fostering a positive environment for real estate transactions and minimizing risks.

With projected growth in the coming years, Spain’s property market is set to become even more attractive. This anticipated expansion offers the potential for property values to appreciate, giving investors the opportunity for capital gains over time. The steady increase in Spanish house prices further underscores the reliability of this market, adding to its appeal.

While neutral indicators, such as average rental yields and moderate inflation, should be taken into account, Spain’s overall stability and growth potential make 2024 a promising time for property investment. To explore all the essential steps for a successful purchase, be sure to check out our comprehensive guide: Buying a Property in Spain As a Foreigner. It’s packed with expert insights to help you navigate the Spanish real estate market.