Why investing in property in Barcelona is profitable
According to a survey by PwC, in 2016 Barcelona joined the top 15 European property markets with the best prospects for investment. Experts at Tranio.com have examined the real estate markets in the city and in greater Spain to outline what distinguishes the property market in Catalonia’s capital city.
Apart from a seaside setting, zesty and distinctive cuisine, cultural diversity and a well-developed entertainment industry, there are many objective reasons for Barcelona’s recovery from the 2008 crisis and rise as a promising market for property investment. These factors include the following:
- low interest rates
- the availability of cheap properties with a potential for price growth in the market
- the demand exceeding the supply
- growing tourist flow
3,500,000 €
Total area 750 m² Land area: 1,000 m²
1,100,000 €
Total area 349 m² Land area: 20,000 m²
1,400,000 €
Total area 454 m² Land area: 2,166 m²
1,100,000 €
Total area 424 m² 6 bedrooms
598,000 €
Total area 280 m² Land area: 880 m²
1,475,000 €
Total area 950 m² Land area: 80,000 m²
Price on request
Total area 800 m² Land area: 1,600 m²
670,000 €
Total area 376 m² 4 bedrooms
Low interest rates
One of the reasons for the attractiveness of the Spanish market in general, and that of Barcelona in particular, is the low interest rates.
The EU mortgage rates are based on Euribor, an interbank offered rate. In March 2016, it reached a negative value, and in June fell to −0.018%, while exceeding 5% during the 2008 crisis.
The Spanish banks provide
According to the National Institute of Statistics (Instituto Nacional de Estadística), in March 2016 the volume of the loans provided increased by 14.5%
The foremost reason for Barcelona’s market growth is the low mortgage rates. Largely thanks to this factor, the Spanish market in general is recovering, but the Catalonian capital demonstrates more rapid growth rates compared to the national level, being the strongest market and the most developed region of the country. During the crisis, the mortgage lending market froze, but as soon as the Spanish banks resumed providing loans, Spaniards began actively investing in property. In addition, foreign investors — nationals of the UK, the Northern European countries and Russia — started coming back to the market. Clients from China are also investing in Barcelona to obtain a Golden Visa. The profitable
euro-dollar exchange rate particularly attracts US citizens to Europe and Spain.
Low prices and growth potential
As of Q1 2016, the prices of property for sale in Spain are more than 40% lower in comparison with the 2007 peak value. The average square metre price in the country has fallen from €2,862 to €1,628 in a decade. The prices in Barcelona are 25% lower in comparison with the 2007 peak level. This suggests that, having a big growth potential, this market has been much more resistant to the crisis than the Spanish market in general. The prices in the Catalonian capital are already growing and exceeding the 2013 level — the year they bottomed out — by 15%.
Barcelona is one of the most expensive markets in Spain, but in comparison to the other
The prices of property for sale in Barcelona are expected to grow more rapidly than those in Spain as a whole. According to Trading Economics' estimates, the average nationwide prices will remain at roughly the same level through 2017, while according to Servihabitat, they will increase by 3.8%. At the same time, according to the forecasts by Engel & Völkers, during 2016 the residential property prices in Barcelona may grow by 7%, while the analysts from the University of Barcelona predict an average of 18% in the city and
Property demand exceeding supply
Most transactions in Barcelona involve existing property. In comparison to 2012, when the market hit the bottom and there were 26,000 transactions closed in the province of Barcelona, in 2015 the residential property sales grew by 40% to 37,000 transactions.
Between 2014 and 2015 the sales increased by 19%. At the same time, the sales of newly built residential property are shrinking (-20%
According to CBRE, Barcelona needs 7,900 newly built properties per annum, while
Nevertheless, while the number of commissioned properties in the capital of Catalonia is shrinking, the number of started projects is increasing. In 2015, the number of the new properties under construction grew by 87%
The volume of construction in Barcelona is more than likely to increase in the years to come. According to Servihabitat.com, in 2016 the number of construction projects started in Spain will grow by 10% to 44,600, and the number of projects completed will grow by 12.5% to 50,800.
Growth in the number of tourists
In 2014, Barcelona came in fourth in Europe after London, Paris and Rome by the number of foreign tourists. This is the only
Barcelona attracts tourists with
The steady growth in the number of tourists in Barcelona between 2012 and 2015 suggests that the positive trend will continue in the coming years.
Barcelona's property market development prospects
According to Trading Economics' estimates, in the near future Spain's GDP will keep growing, and the unemployment rate will continue shrinking; all the while interest rates will stay at record lows, at least until 2017. The economic situation improvement will favour the property price growth not only in Spain in general, but also in the individual markets, particularly of Barcelona and Madrid.
- residential property price growth: a rise in property prices by
7–18% per annum can be expected - demand growth: the mortgage rates are going to remain low; therefore, sales will continue growing
- newly built property shortage: the supply of the newly built property market at present cannot match growing demand, resulting in investor interest shifting to Added Value projects in the future
Overall, Barcelona's market is beneficial for speculative investments aimed at making money on future price growth.
Yulia Kozhevnikova, Tranio.com
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