Foreign interest in Spanish housing market grows

With prices down by a third from their peaks around the start of 2008, the Spanish housing market is attracting growing interest from foreigners looking for a second home in warmer climes.

According to figures released Wednesday by the Public Works Ministry, the number of homes acquired by non-residents in the third quarter of the year climbed 18.0 percent from a year earlier to 8,803. Sales of homes to foreigners have now grown for the past five quarters, with increases of 16.2 percent in the first quarter of 2012 and 15.3 percent in the second.

The government has been looking to promote sales to non-residents to reduce the huge stockpile of unsold homes built up during a decade-long boom that turned to bust around the start of 2008.

Last month, the government said it was considering granting temporary residence cards to foreigners who buy homes valued at over 160,000 euros. The measure is aimed mainly at the Chinese and Russian markets.

The Public Works Ministry did not give a breakdown of the nationalities of the foreigners buying property in Spain in the third quarter. The purchases were concentrated on the Mediterranean coast, with the preferred areas being Alicante, Málaga, Barcelona, the Balearic Islands and Girona.

Still to bottom out

Overall, sales of homes in the period July-September declined an annual 1.17 percent to 75,642 after falls in the region of seven percent in the two previous quarters. Existing home sales climbed 1.7 percent from a year earlier, while new home sales fell an annual 6.7 percent. Over the past 12 months, home sales declined 5.1 percent from a year earlier to 229,351 units.

The ministry said the overall fall was the lowest since the fourth quarter of 2010. The fall in prices has failed to revive a market that is still beset by Spain’s jobless rate of 25 percent, and by tight credit conditions as banks continued to try to absorb the excesses of the boom period.

The removal of tax benefits on mortgage payments on the family home and the increase in the value-added tax rate on new home purchases as of the start of next year have also failed to provide a significant boost to a sector that has been in the doldrums for the past five years.

Seven regions experienced annual increases in home sales, the most notable being in La Rioja where they climbed 56.1 percent. Property transactions in Catalonia were up 8.7 percent, and rose seven percent in Asturias. The biggest fall was in Navarre, where they declined 56.2 percent followed by Extremadura, where they dropped 22.2 percent.