Foreign demand hits record first-quarter high, but growth slows down

22,381 of the Spanish properties sold in Q1 of this year had a foreign buyer, up 8% on the same time last year, according to data from the Spanish land registrars’ association. Foreign demand for property in Spain boomed in the wake of the coronavirus pandemic, but growth began cooling down in the second half of 2022.

Foreign demand in the first quarter over the last ten years, 2023 is the best year on record, and 39% higher than 2018 – the best year before the pandemic. So even though growth is cooling down, foreign demand remains much higher than it was before Covid-19 came to town.

Local (Spanish) demand declined by 3% in Q1 (pushing down total demand by 2%), meaning that the market share of foreign buyers hit a first-quarter high of 14.5%, up from 13.2% in the same period of 2022, illustrated in the next chart. That said, if you consider all quarters, the foreign market share is down from an all-time high of 15.9% in Q3 2022.

Foreign demand for Spanish property by country in Q1 2023

The UK was the biggest market with 2,216 buyers, followed by Germany and France. Year-on-year the markets that increased the most were the USA, Russia and Poland, whilst demand declined in the UK, Germany, Norway and Sweden.

Foreign buyers by Spanish region

Turning to foreign demand by Spanish region, the Valencian Community was the most popular region amongst foreign buyers with 25,930 sales in Q1, followed by Andalusia and Catalonia. Sales increased the most in the Canaries (+26%), followed by Catalonia and the Valencian region, but declined in the Balearics (-31%) and Madrid.

Foreign market share (FMS)

The market share of foreign buyers was highest in the Balearics (29.2%) closely followed by the Valencian region (28.4%) and the Canaries (28.3%). Although the Balearics had the highest foreign market share, the proportion of foreign buyers in the Balearics declined from 35% in Q1 2022 to 29% this year, the biggest decline in any regions by a wide margin. The foreign market share was stable or slightly up in all other key regions.

Balearic decline
For some reason foreign buyers appear to be turning away from the Balearics (down 31% in Q1, against a national increase of 8%), perhaps because the regional government has introduced the highest property-sales taxes in all of Spain, or perhaps because the government has gone out of its way to make foreign buyers feel unwelcome in the Balearics. Whatever the reason, the government, a coalition of Socialists and the hard left, appears to be achieving its goal of discouraging foreign buyers led by Germans from investing in the region in the hope this will make housing more affordable for the ‘vulnerable’, despite being in completely different market segments.

Source: Spanish Property Insight, May 2023.