The Property Finders
Expert advice on the Barcelona property market
Barcelona Property Market 2021
Since the 2008 meltdown a notable feature of the Spanish Property Market in the recovery phase was how disconnected the overseas and domestic sectors of the market were. In general, overseas buyers were not really affected by what was going on in the Spanish economy, however bad that was. In fact, the overseas part of the property market got going in recovery mode while the domestic side was still on the way down. We still see that aspect of the overall market today in most of the locations where the majority of overseas buyers go.
However, that does not apply in Barcelona and other major Spanish cities. The overseas element is relatively small and it is the domestic economy that is the dominant feature. Therefore, issues such as rising unemployment and reduced GDP have an immediate impact on the property market in a way that doesn’t really occur in locations where the foreign sector may be as much as 50% of the overall market. Overall, foreign buyers account for about 18% of the total property market in Cataluña region, dropping to about 13% market share in the province of Barcelona. Although there are no reliable statistics just for the city, our experience suggests the overseas element is approximately 10%.
Review of 2020
Are they going to maintain current levels or fall? What effects will the Covid-19 crisis have and will it be a good year to buy/invest? But, before answering these questions, let’s briefly look back to what happened in 2020.
For the second consecutive year we saw property prices fall in Barcelona. In 2019 prices pm2 declined -2.7%. To be frank, all the signs were that with the arrival of the pandemic we were going to enter a period of falls for the foreseeable future.
However, it seems that property prices are actually holding up better than expected although this may be explained by that fact that sellers are not lowering their asking prices given current uncertainty. This makes negotiating even more important than ever and the purchase price agreed may be very different. In fact, surveys by the property portal Idealista seem to show at least 20% difference between asking prices and the final purchase price, even before the arrival of the virus. In my opinion, Barcelona property prices could fall between 5% and 8% until the crisis diminishes and the economy starts to recover.
Average Prices Per Square Metre
At the end of 2020 the average price in respect of resale property in Barcelona city was €4,006 per square metre, the same as it was at the beginning of 2005. This represents a -24.3% fall from the high point in June 2007, at which time it was €5,291 per m2.
Up to May 2020 prices were up and down slightly but from then on the collapse in demand turned the tendency downwards. Even so, we see surprising resistance from sellers to reduce prices, in spite of the current situation. However, we don’t believe they will have an alternative in the coming months, given the rise in unemployment to 20%+ in the short term and the 11% fall in GDP.
The Highs and Lows
Average prices disguise differences between districts. Well above the Barcelona average is Sarria Sant Gervasi at €5,133 per m2, while Les Costs is €4,944. Eixample, Gracia and Ciutat Vella are also above €4,000 pm2. In contrast, several districts are below the average: San Martí, Sants, Sant Andreu and Horta. And finally, Nous Barris is at €2,536
In our view, the fundamentals that govern the strength of demand will improve over the course of 2021. We see both employment and GDP holding steady during the first half of the year and will grow strongly once the 70% vaccination threshold has been achieved, hopefully before summer.
However, we don’t expect overall conditions to recover to pre-Covid levels until the middle of 2022. Nevertheless, GDP is predicted to grow 6% during 2021 and job growth and unemployment levels should both improve although the numbers will still be very high. Inevitably, this will have a negative impact on the demand side of the property market.
As with any period of market upheaval there will be winners and losers. The winners will be those who are cash-rich and those with solid financial status enabling them to take advantage of continuing low interest rates as it seems likely that banks will toughen up lending criteria.
In the context of the rental market we can expect to see further downward pressure on prices. The disappearance of foreigners and the increase in working from home has seriously reduced rental demand. However, this reduction in rental demand will in turn put downward pressure on asking prices. As a result, this may provide a buying opportunity for investors looking for rental yields and capital growth over the medium term.
In the final analysis, the evolution of the 2021 Barcelona property market depends on the roll-out of mass vaccination programmes, not just in Spain but also overseas. We firmly believe that the market will recover as soon as the pandemic crisis is under control.
Please get in touch by calling or filling in the form below. We are experts in all aspects of the property market in Barcelona and will guide you to the best properties in the best locations. Our local knowledge will ensure you buy at the best price.
For our report on the Spanish Property Market in general click here.
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