Apologies for the title. Sometimes I can’t help myself.
The Valencia region (which includes Alicante province and Costa Blanca) has been one of the top real estate growth areas in Spain over the last decade, outperforming all of the other Costas, Spanish Cities, and island groups.
In fact, the Valencia region accounts for more than a quarter of all properties bought by foreigners in Spain, and close to half of all the properties sold in Alicante Province (basically the Costa Blanca) are sold to foreign buyers and investors.
There is a strong and consistent demand for homes from mostly German, Dutch, Belgian, French, British, and Scandinavian buyers. The main factors contributing to this demand are ease of access via 2 international airports and the AP-7 highway, good local infrastructure, modern amenities and professional services, fantastic climate, excellent food and beverage choices, beautiful coastline and scenery, and an exceptional overall quality of life.
State of the current property market on the Costa Blanca
It’s impossible to evaluate the current property market without understanding some events of the global economic crisis of 2008 which impacted property prices around the world.
Risky and illegal lending practices in the U.S., like subprime lending (which involved bundling low credit scores and high-risk incomes, with average-rated lenders) meant that many mortgages were approved to low-income households with unstable work. These mortgages were often at higher interest adjustable rates that increased over time, making it increasingly difficult for borrowers to make their monthly repayments.
When housing prices began to decline in 2006, many of these borrowers defaulted on their mortgages taking some of these same financial institutions to bankruptcy, while exacerbating the economic situation in many countries.
Many European banks had also invested heavily in these U.S. mortgage-backed securities during the housing boom and consequently suffered significant losses. In addition, these same European banks also engaged in their own risky lending practices, such as offering mortgages with low down payments and high loan-to-value ratios, which also contributed to a housing bubble in several European countries.
Furthermore, the decline in financial markets led to a sharp contraction in global trade and investment. As a result, many countries around the world experienced severe recessions and high levels of unemployment.
Tough measures
In response to the crisis, the European Union implemented a series of reforms aimed to strengthen and monitor the banking sector. These included stricter lending requirements, and the introduction of new capital and liquidity requirements for banks.
Property purchases in Spain after the financial crisis have mostly fallen under 2 categories:
a) Mortgages acquired under these much stricter regulations (by Spanish citizens with a proven stable income or foreign residents with a proven stable income).
These approved mortgages required a much larger downpayment; usually 20% to 30% in the case of citizens and residents, while the bank would lend a maximum of 70% to 80% depending on the borrower’s monthly income in relation to the loan amount.
b) Foreign cash buyers.
With these stricter measures in place, the growth in the real estate industry over the past decade is certainly more natural than what happened in the early 2000s.
Spanish real estate as an inflation refuge
In recent years escalating inflation has seen investors place more confidence in the Spanish real estate versus financial institutions.
Political instability in Eastern Europe has also led to a massive demand for capital investment and particularly real estate investment in Spain.
We have seen a boost in sales to Polish, German, Ukranian, and Romanian buyers. Purchases from Polish buyers now make up nearly 3.2% of all real estate purchases by foreigners in Spain, while purchases from German buyers have increased 97% in the last year.
Will house prices drop in the Costa Blanca? Is it a good time to buy property?
There will always be fluctuations, even in healthy real estate markets, however, it can be argued that the property market in Spain is the most stable it has ever been.
The advantage that Spain has always had is a wonderful lifestyle, a beautiful coastline, and abundant sunshine. A lot of investors, however, have been waiting for its infrastructure and services sector to catch up with Northern Europe. Not only is that already happening, but Spain is also extremely well positioned in several industries.
Due to its abundance of sunshine (a commodity that Northern Europe lacks) Spain is attracting multi-billion Euro investments in the e-fuels and renewable energy sectors.
There is also considerable investment and growth in the aerospace, ICT (Information and Communications Technology), food and nutrition, and biotechnology industries.
The Costa Blanca does not only offer an enviable lifestyle, it’s also an important hub for future industry growth. These are all important factors that contribute to a strong and resilient real estate market.
Which are the Cheapest coastal areas of the Costa Blanca to buy a property?
What is the cheapest coastal town to live in the Costa Blanca?
From South to North: El Mojón, Torre de la Horadada, Mil Palmeras, Guardamar del Segura, Santa Pola, El Campello, Villajoyosa, Calpe, and Denia.
It should be noted that cheap does not necessarily equate to a good investment, or even a good idea. You may spend less on your initial investment but a lot more on your living expenses.
It’s essential to purchase a property near a strong established community that can offer all the basic and important amenities and services.
Some of the cheaper and more isolated areas only offer limited options and you may have to drive long distances each time you want a better selection than the local shops can offer, or if you want to consult professional services.
Consider that in summer many taxis are really busy and will often not travel to the further areas, in addition, their fees can be exorbitant.
All these factors play a big role into the sort of lifestyle you can have, and whether your home purchase can increase in value over time, or even keep up with real estate in the areas that offer a more complete variety of services.
I suggest you speak with a lot of the long term expats in the areas you are interested in and ask them what the area is like, what’s lacking, and what are some concerns.
Is it better to rent or buy a house in Costa Blanca?
In a lot of areas of Spain, and certainly on the coast of Spain, the rental prices have risen dramatically.
In many instances properties are rented for more than the monthly mortgage repayment would be for the value of that property.
If you hade to invest the same monthly repayment amount on a home loan you would be able to afford a larger home, or a home in a more convenient area.
If you were purchasing a holiday home in many cases you can also rent it out for more than your loan repayments.
Of course, before buying a property in Spain you need to spend time in the area to get a really good idea of what works for you, and precisely where you want to be.
People often buy a property further from the coast or the nearest town only to decide in a year’s time that they would prefer not to use the car that much and would enjoy the convenience of being a lot closer to all amenities.
It’s very important to first spend some time living in an area to help you understand how compatible the location is with your routine and lifestyle requirements.
It’s always advisable to work with an experienced local real estate agent who can provide you with more specific information about services, amenities, costs, pros and cons, etc. to help you make informed decisions about whether the area will work for you.
At ImmoSage we work with the Top local real estate agents in the various areas of the Costa Blanca. It’s a free introduction service with no extra costs.
