The Costa Blanca in 2019


There is definitely more optimism around in the Spanish property market at the end of 2018 and heading into 2019. And that’s also true in the Costa Blanca region. However, it may be too soon to to be totally confident that everything is going in the right direction. Perhaps there is still a possibility that economic and political issues could make the market change course. The independence issue in Cataluña is on-going, as is Brexit. If the economy slows there it may spill over and negatively affect national growth. Nevertheless, the statistics are looking good. According to 2018 figures property prices rose an average 6.49% in the period. In addition, transaction numbers were up 9.7% nationally with the overseas market registering another all-time record. In 2018, 103,673 foreigners bought in Spain and almost one in three (29.14%), chose the Costa Blanca region.

Although these figures are undoubtedly positive there’s still a long way to go before the property market is out of the deep hole it’s been in for the last decade. So far, Palma de Mallorca is the only location in Spain where prices have exceeded pre-recession levels. Elsewhere, in many places prices are still anything between 15% and 25% below pre-crisis highs while the Costa Blanca region is still 25%-30% below peak levels.

However, in our opinion, property buyers from overseas shouldn’t focus too much on national price trends. This is because Spain has two property markets and they operate completely independently of each other. And even within the two markets there are further divisions between prime and secondary locations. Prices are growing in the prime areas but remain stagnant in the secondary ones. Average prices tell buyers much more about the domestic market. But 65% of all property purchases take place in just four regions. Unsurprisingly, one of those is Madrid while the rest are where the majority of foreign buyers head for, either for permanent living or second homes. One of those regions is the Costa Blanca.

The Costa Blanca

The Costa Blanca is the 200 kilometre stretch on Spain’s eastern Mediterranean coast. Alicante is the provincial capital and Javea and Denia are the prime locations for overseas buyers. However, the Costa Blanca is also more loosely used to describe everything between Cataluña and Andalucía, that is, the provinces of Valencia, Castellón, which make up the Comunidad Valenciana, and Murcia. While it is true there are high-rise and high density resorts on this coastline it is also the location of some of Spain’s most stunning beaches. These range from unspoilt white sand beaches to small, rocky coves and in Valencia, one of Spain’s most beautiful and historic cities.

There are more foreign buyers in this region taken as a whole than anywhere else in Spain. The notarial returns for 2018 showed a total of 35,295 purchases made by buyers from overseas in the region’s four provinces. This means that 34% of all international buyers in Spain bought in this region. However, this reports focuses on the Alicante region as it is the most active, at least in respect of overseas buyers. As a result, it is an excellent example of what is happening in the different sectors of the property market and clearly shows why we maintain that the overseas and domestic markets operate to different rhythms.

Domestic versus International

Alicante, along with the rest of Spain, has endured the worst economic crisis in Spain’s recent history. It’s true the unemployment rate is falling but at 14.5% it’s still the second worst rate in the E.U. Only Greece is worse. And in spite of the improvement the under 35 age group is still suffering disproportionally with an average rate of 30 % unemployed. But we must remember that averages mask regional variations and it’s still above 50% in places. The grim reality is that at the end of 2018 five of the ten worst unemployment black spots in the EU were in Spain. (Source: Eurostat) As a consequence, purchasing power remains low in the domestic economy.

Population has decreased in this region because of emigration. This is due to other nationals returning to their countries but also because Spaniards are still being forced to look for a job abroad. The bad news is that those Spaniards are the most skilled and best educated.  Statistics like these help explain why the domestic property market is still much weaker than the international one.

On the other hand, the overseas property sector experienced continued growth during 2018 on the Costa Blanca. Attracted by the Mediterranean climate and wonderful beaches, overseas buyers are also being drawn by prices still at levels last seen back in 2002. The importance of foreign buyers to the Alicante market is clear from the statistics for 2018. A total of 21,023 overseas buyers purchased property in Alicante province, that’s about 65% of all foreign buyers in Valencia and Castellón combined. And while across Spain international buyers accounted for approximately 18.2% market share they make up nearly half the total market in Alicante, 21,023 foreigners compared with 22,717 Spanish residents.

These statistics beg the question: why so many foreign buyers. One answer has to be affordability. We believe the most reliable way to compare prices in different regions and locations in Spain is to look at the price per square metre. With asking prices all over the place this is a much better way to check if you are paying the right price for current market conditions. Across the region foreigners paid an average €1,331 per square metre in 2018, the lowest of all the Mediterranean locations popular with overseas buyers. Compared with the €2,887 average per square metre in the Balearics and €1,705 in Andalucía the Costa Blanca is still affordable for most buyers.

Costa Blanca 2019 – Conclusions

My conclusions are very similar to last year’s since the main factors affecting the property market on Spain’s eastern coasts are unchanged, or changing only very slowly. As regards the domestic market I believe it is going to remain flat or may even fall slightly for two main reasons. Firstly, unemployment remains around 15% of the active population. A recent report suggested it take an average of six years for a young person to find a job. Even worse, one third of all Spaniards under 30 have never had a job. There are signs of improvement but many new jobs are on temporary or part-time contracts and there’s been a big increase in the number of self-employed. And inevitably, many jobs are seasonal in an area with a large tourist economy, such as the Costa Blanca.

Secondly, although the banks are making encouraging noises that might lead one to think the mortgage drought is over, that’s all they are really, encouraging noises. A buyer will need a large deposit as bank valuations remain low relative to the price agreed. In addition, banks are are scrutinising the status of buyers as never before. So, while offers of 80% LTV give buyers hope, the subsequent low valuation often means they have insufficient funds. And the recession and housing crisis seems to have changed attitudes to home ownership in Spain, particularly among young families, and many now see renting as an alternative.

Nevertheless, the Costa Blanca remains a top location, one of the most affordable on the Mediterranean coast and very competitive compared with other regions. Bear in mind that the average price for a second hand property is €125,000 and €250,000 for new constructions. But prices like these are not going to remain for much longer, certainly not in the prime areas that most overseas buyers head for.
©Diego Sabater

This report will be updated throughout 2019 as new data becomes available so do check back for the lastest information. Or you can follow us on Twitter and Facebook by clicking the buttons at the top of the page, for all the property market news as it happens. For our report about the Spanish Property Market in general click here.

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