Barcelona Property Market

Still an Excellent Investment in 2o17!

Barcelona Housing Prices

After years of sharply falling prices, it appears that the Barcelona Property Market is finally beginning to upturn so now really is the time to buy property in the Catalan capital.

In 2016 property prices in Barcelona rose by 14.4%, which from a property point of view makes it the most dynamic city in Spain.

Experts are clear that, particularly in the Catalan capital, the economic recovery is now in full swing and the reason for this is mainly due to the fact that Barcelona projects its international image so successfully, particularly as far as tourism and the Barcelona brand is concerned.

Combining this with the fact that throughout the worst years of the crisis property prices in Barcelona fell by 50% when you take inflation into account means that prices are still relatively cheap from the point of view of certain buyers, particularly foreign ones.

The graphic below gives a visual overview of the evolution of Property Prices in Barcelona since 2001. (Source www.idealista.com)

Evolution of Property Prices in Barcelona 2001-2017

Local Buyers Are Stimulating the Market

Throughout the worst years of the economic crisis, foreign investment in the Barcelona property market grew incrementally with foreigners accounting for 10% of property buyers.

These investors tend to buy properties either as second residences for their short stays in the Catalan capital or convert them into tourist apartments or short-term rentals and receive quick returns on their investments.

However, while foreign investment remains high, it is clear that the local property market is also recovering as the Spanish economy, led by Catalonia, finally starts to upturn.

The importance of local investment can be seen from the statistics published by the municipal statistics office and the Internet property portal Idealista, which show that, in absolute terms, the district that has increased its value most markedly is the Eixample where the price per square metre rose by a massive 19.4% throughout 2015.

Although I'm sure there's a reasonable amount of foreign investment in the district, the Eixample has always been home to young upwardly mobile Barcelonans, whose spending power seems to have improved now the economic crisis is a thing of the past.

With a rise of 15.7%, Ciutat Vella is Barcelona's second healthiest district in property terms and this is also probably due to in part to local investment but its gentrification is almost certainly accelerated by foreign buyers, who are seduced by the idea of owning property in Barcelona's historic city centre.

Barcelona Property Prices by District - Last Quarter 2017

... But Foreign Buyers Still Count!

The fact that foreign buyers still count can be seen in the annual price rises of the city centre districts of Ciutat Vella and the Eixample, which have gone up by 8% and 8.2% respectively over the last 12 months.

Fortunately for me, the trend looks set to continue because it is in these two districts along with Gràcia that most of my foreign clients tend to be interested in buying.

Foreign buyers are investing in property again and Barcelona has become a safer bet than the stock market. The benefits that you can draw from rentals run between 4% and 9% and this can be much higher in the case of a luxury apartment.

The truth is that since the crisis began in 2007, property prices in Barcelona dropped more than in other major Spanish cities, such as Valencia or Madrid, which given its high international profile means that the Catalan capital is a great investment as the market begins to pick up again.

Building Space Is Limited

Another thing that is encouraging the upturn in prices is Barcelona's geographical location which, because it is surrounded by mountains and the sea, makes major building projects difficult, if not impossible, within the city limits.

There are relatively few new buildings and this means that the most of the property available is second hand.

One of the recent tendencies, though, is to buy up old buildings and completely refurbish the interior whilst leaving the facade intact and this combination of a traditional aesthetic, central location and modern convenience is particularly popular with foreign buyers.

Joan Olé, President of the Col.legi d'Agents de la Propiedad Inmobiliaria de Barcelona - the city's Estate Agents Organisation - that sales to foreigners are still on the up and make up around 10% of the total market.

The so-called Golden Visa law that allows a Spanish residence permit to anyone who invests more than €500,000 in property in Spain has definitely added impetus to this tendency.

According to Javier Llanas, head of the property portal Habitaclia, the buyers who most commonly take advantage of this new law are the Russians and Chinese although we are also seeing a significant increase in Indian investors.

My clientele tend, however, to be Americans and Brits.

Two Types Of Foreign Buyer

Joan Ollé, Estate Agents' Presidents, believes that foreign investment should be divided in two segments.

On the one hand, the foreign buyers who are essentially investors planning obtain benefits by renting out their apartments, often turning them into tourist rentals, and on the other hand, foreigners who are buying properties that they intend to live in themselves.

According to Francois Carrière of estate agents Coldwell Banker, who specialise in finding residences for foreigners, 70% of purchases of over 2 million euros are completed by Russian buyers.

Carrière believes that this type of buyer will increase in the Catalan capital in the coming years and Ollé thinks the same although he emphasises that there are still legal hurdles, such as visas, that could be made easier.

As far as prices are concerned, Ollé stresses that Barcelona is very cheap and as soon as local buyers begin to recover from the crisis, we can expect them to rise quite quickly.

'Our calculations suggest that if we take inflation into account housing prices in Barcelona have dropped between 45% and 50%. What's more new constructions are very thin on the ground and within a couple of years there'll be none left.'

Differences Between Barcelona Districts

However, the situation is not the same in all Barcelona districts and Javier Llanas from Habitaclia points out that the evolution of the average price throughout 2017 has increased these differences.

To a certain extent, this just reflects the differences between different districts and shows where the crisis has hit hardest.

For example, the cheapest district is Nou Barris where prices in the last quarter of 2017 stood at 1,945 euros per square metre, which was a rise of 9.4%.

This are still high levels of employment in Nou Barris but contrasts sharply with Ciutat Vella, also badly hit by lack of jobs among the local population, but highly desirable for the foreign investor due to its central location.

People buying in Ciutat Vella neither live or work there so unemployment levels have no effect on property demand but one of the negative effects is that foreign investment means that residents are being forced out of their lifelong neighbourhoods.

So now is definitely the time to invest in the Barcelona Property Market and I'm sure I can help you make the right investment decision.

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