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Expert advice on the Barcelona property market
Barcelona Property Report 2019
Barcelona 2018 Market Review
Of the 89,085 transactions that were registered in Cataluña in 2018 67% (60,448) occurred just in Barcelona. This statistic underlines the importance of the city in the region’s property market. 2018 finished the year consolidating the recovery that started several years ago. Nationally, the total number of transactions was 562,900, up 9.7% compared with 2017. Mortgage finance is more available and prices continued to grow.
Prices have grown in Barcelona for 5 consecutive years but even so, are still about 40% below the peak prices registered in 2007. The average price per square metre in Barcelona in December 2018 was €4,204 and similar to levels last seen in the middle of 2005.
Outlook for 2019
In my opinion the market is still growing but at a more moderate pace as property prices have increased more than the purchasing power of the average Spaniard and household budgets are under pressure. The final quarter of 2018 showed some price reductions in over-optimistic asking prices but, in general, the trend is bullish. We can see some price corrections to the downside in certain assets that have come to market in the last quarter with very optimistic prices but in general the trend is bullish.
Overall, the outlook for 2019 is positive and there are no obvious warning signs of a change in trends. Barcelona’s economic environment is favourable; creation of employment, low interest rates and accessible financing. These three elements are the basis for the property market continuing the positive trend of recent years and I see them holding throughout 2019.
Some commentators are warning of the threat of a new bubble but I think this is unlikely at the present time. Firstly, prices are still well below the 2007 peak and secondly, mortgage lending is much more cautious than before. Buyers today need to have a 30% deposit available and their financial status will be rigorously scrutinised.
What to watch out for
In my opinion, the Barcelona market has recovered from the brutal crisis between 2008 and 2013. However, although the trend is still upwards we must be vigilant. The property sector is sensitive and any instability could affect this positive path. On the horizon I see three possible threats. Firstly, a slight rise in interest rates, secondly, any slowing of the economy and lastly, political instability due to the Catalan independence issue. For example, overseas buyers represented 14.76% market share nationally. However, in some regions foreign buyers took a much higher market share; 48% in Alicante and 35% in Málaga for example. Meanwhile, the number of international buyers in Barcelona in 2018 represented a 11.63% market share, somewhat below the national average. Is this a sign that international investors are hesitant about entering the Barcelona market in 2019?
An Emerging Trend
2018 was a year marked by the small rental or refurbishment investor, individuals rather than large investors, in many cases driven by poor returns on savings due to low interest rates. On average in Barcelona, rental investments are achieving a return of 4-6% and with potential future capital growth included this can rise to 10-15%.
This new protagonist has come to stay, Barcelona is one of the most valued cities in the world and is receiving more and more foreigners who need rental housing. In addition, the current price of homes in Barcelona is above affordability levels for local buyers on average salaries and this group is also boosting the demand for rentals. These two circumstances; prices above the average purchasing power and the growing demand of foreigners, are key to understanding the rise of the small investor.
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