It is nothing new that the real estate market has always attracted the attention of large fortunes. Crises are also less common in the luxury sector. What is curious is to see to what extent the most comfortable buyers stimulate the industry in this difficult period when home sales transactions are in complete decline and mortgages have become inaccessible for the majority of consumers and have become almost a premium product for the Spanish people.
At least some signs that the housing market is breaking up in recent months suggest that. The last one is from an agency that focuses on luxury residences: Engel&Völkers. His data was echoing.
Premium market on the rise. Engel&Völkers’ results cannot be taken as a representative reference for the entire industry, neither due to the volume of activity nor to the business approach; But they provide an interesting clue as to how the premium market breathes. After all, the German agency pays special attention to the luxury and semi-luxury housing segment. And that shows that that branch of the market is healthy. Good no, great.
Its latest report on the real estate market concludes that there will be a significant increase in million-dollar home purchases in 2024. To be more precise, Engel&Völkers expects home transactions costing more than a million dollars to increase by 40% in Spain this year; According to the agency, this growth is led by Malaga, Mallorca, Madrid, Barcelona and Costa. Blanca.
More information to consider. The agency crunches some numbers to help get an idea of how the market is breathing and what the 40% forecast turns into. According to the company’s detailed data, 3,879 houses were sold in Spain last year. Country. And of that figure, 14%, or about 550 properties, sold for seven-figure prices or more. Considering this data in the table and its activity at the beginning of the year, the agency will have closed 770 sales for a million dollars next December.
Prices are affected by both the type of house and its location. The agency estimates that 55% of the portfolio of properties for sale in Madrid exceeds the million-dollar mark, while this falls to 40% in Barcelona, 15% in Valencia and 25% in Seville. In some particularly sought-after spots, such as Pedralbes in Barcelona, the data is even more striking. Here, 30% of the sales recorded by the company exceeded two million euros.
overgrown. If the real estate agency’s predictions come true, the landscape for the luxury housing market will not be new. Insurance company Hiscox’s report on this segment a year ago already showed how good the growth rate of million-dollar home operations was.
“In 2022, approximately 8 thousand real estate transactions exceeding 3 million Euros took place in our country; this represents an increase of more than 55 percent compared to the number of transactions in 2021 and more than twice that of 2019,” the research said. This means that the luxury segment represents a small part of the Spanish housing market: close to 5%, according to the data it manages.
Prices are increasing. More sales of million-dollar homes are not just expected. Sotheby’s International Realty, another company specializing in the premium real estate segment, recently stated that the average price of luxury homes will increase by 6% in 2023, exceeding the market average. There are already analysts who predict that both the volume of buying and selling operations and the values of the most exclusive houses will continue to increase in 2024, albeit at a slower pace.
Turnkey payments. Another interesting trend that defines the luxury real estate market very well is buyers paying for their homes in cash, without having to go to the bank office to request a mortgage. Their numbers are remarkable, but most important of all is their recent evolution.
In the context of rising interest rates, Engel&Völkers is ensuring that more than half of the properties it sells in the country’s main capitals in 2023 will be paid for “without resorting to external financing”, that is, using its own resources and without the need for any financing. in debt. In 2021, 61% of closed sales in Madrid required a mortgage, in 2023 this rate was already 47%.
“Similar figures were recorded in Barcelona. Even on the coast and in the Catalan Pyrenees, the number of customers buying houses with their own funds has increased. In Valencia, only 35 percent of buyers applied for financing. This rate was 65 percent in 2015. “It is in line with other cities,” the agency comments. It guarantees that in certain regions of the Costa Blanca, it represents 95% of customers who buy homes using its resources.
No visit to the bank. His experience is consistent with the portrait of the industry left by other analysts, even beyond the luxury segment. The report on the real estate and mortgage market published by Funcas in January concluded that only four out of every 10 sales require a mortgage. Based on measurable and comparable data, this means that of the 832,756 properties sold between January and October, only 323,998 were purchased following a bank manager visit.
Great question. This data raises the next big question: Who is buying a house in Spain? Who would immediately rush into purchasing without signing a loan to avoid paying interest? The industry leaves some extra clues that at least some of these transactions are investments made by funds or wealthy buyers, for example, the predominance of so-called “wholesale investment”, or that a significant part of these operations are concentrated in tourist areas.
“The most obvious interpretation of this contrast is the realization of a large number of wholesale and non-resident investment transactions, which significantly determine the total transactions on the market and therefore price increases. Another significant percentage of unfunded mortgage operations is concentrated in tourist circles and is monopolized by Spaniards or second homes by non-residents. The same “It is also happening in inner cities, and this affects the option of buying a house as a non-residential investment.”
Pictures | Vita Vilcina (Unsplash) and Engel&Völkers
in Xataka | Renting has always been option B for young Spaniards. The current crisis has changed that
Source: Xatak Android
Ashley Johnson is a science writer for “Div Bracket”. With a background in the natural sciences and a passion for exploring the mysteries of the universe, she provides in-depth coverage of the latest scientific developments.