Spain is still deep in the grip of the Coronavirus health crisis with arguably the worst numbers on the planet in terms of contagion and death rates, and with awful economic news on the way once the health crisis starts to subside. So we are still in the eye of the storm as I publish this second part of results of my survey of opinions of how this crisis will affect the Spanish property market, in particular the holiday home market.
This week we will look at how the different groups responded, and how they compare, where relevant. In other words we will look at how buyers, owners, vendors, and people in the business responded to the same questions, allowing us to identify differences of opinions, if any.
I’m going to keep this analysis short because I’ve had most of the symptoms of COVID-19 for more than a week and the relentless coughing and fever and fatigue are getting to me.
How long will the Spanish property market stay frozen?
When asked how long the market will stay frozen, buyers are the most optimistic with just 58% saying more than six months, compared to 68% of owners, and 76% of sellers. Only people in the business are optimistic enough to think that the market will be moving again within six months. Let’s hope they are right.
From a buyer’s perspective, it’s interesting to note how gloomy would-be sellers are, with 76% of them expecting the market to stay frozen for more than six months. That might make them more motivated to accept an aggressive offer.
What will happen to Spanish second-home prices?
On the question of prices, there is considerable agreement between buyers, owners, and sellers that house prices are going to fall significantly as a result of the Coronavirus.
Would-be buyers are expecting the biggest falls, with 67% expecting prices down more than 10%, and 98% expecting falls of some order. Owners, and would-be sellers have similar opinions on prices, with around 58% expecting big falls, and 35% expecting falls of up to10%. Once again, only people in the business are more optimistic, with just 41% expecting big falls and 48% expecting small falls. People in the business are either the best informed, or the most guilty of wishful thinking.
What will be the impact on foreign demand?
Once again, would-be buyers are the most pessimistic, with more than 90% expecting a temporary or permanent reduction in foreign demand for homes in Spain. The trade are most optimistic, with almost 30% expecting foreign demand to return to normal in a few months time once the worst of the crisis is behind us.
What will buyers do?
What do the different groups think would-be buyers will do in the light of the coronavirus crisis?
Would-be buyers themselves say wait for bargains to appear in 52% of cases, whilst 19% say no change in plan, and 28% say they will abandon their plan to buy this year. So, more than half of people who consider themselves looking to buy will now be bargain hunting, whilst the market might also have to deal with a collapse in demand of at least one third.
What owners think buyers will do is very close to what buyers say they will do. Sellers, on the other hand, think more would-be buyers will abandon the market this year, and less will go bargain hunting. So, as far as sellers go, there is good news and bad news; the good news is there might be more buyers around than they think, but the bad news is they will be looking for big reductions in asking prices.
What will sellers do?
Sellers say they will take their homes off the market and wait for better times in 41% of cases, which only 8% of buyers were expecting. So buyers might find they are bargain hunting in a smaller pool of motivated sellers.
Almost 50% of sellers will not change their plans, and only 11% are going to drop their asking price straight away to try and attract a buyer, which 42% of buyers are expecting them to do. So once again buyers and sellers have different expectations exacerbated by the lack of market transparency. These factors bung up the market at the best of times, and at a time like this you might see the market blocked for longer than it should be because buyers and sellers have unrealistic expectations made worse by the lack of transparency.
That said, with a crisis of this magnitude, I assume there will be some distress sales in the first three to six months after travel restrictions are eased.
About the respondents
The average age of respondents was 58.5 years, with a mode (biggest group) of 63 years old. 76% of respondents were between 49 and 76 years old, and 50% were over 60 – a Coronavirus risks group!
Next week I will publish a selection of the many thoughtful comments the respondents submitted. There are too many to publish the whole lot.
About Mark Stücklin
Mark Stücklin is a Barcelona-based Spanish property market analyst, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008).