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Market Analysis Andalucía, Spain

Posted on Marsh 1, 2017 Made by IPI Group of Companies

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TableofContents

1.0INTRODUCTION 3

2.0KEYMARKETINDICATORS 42.1.SALESVOLUMES 42.2AFFORDABLEPROPERTYPRICES 42.3INCREASINGSPANISHPROPERTYPRICES 52.4COMPETITIVEPRICING 62.5TOURISM 6 2.6AQUALITYREGION,ATWELVE-MONTHSEASON 72.7ASAFEHAVEN 72.8HIGHYIELDS 7

3.0GENERALMARKETINDICATORS 83.1.FEWERBANKFORECLOSURES 83.2DECREASINGUNEMPLOYMENTRATE 83.3LOWMORTGAGERATES 83.4THEECONOMYISNOWGROWINGSTEADILY 93.5WHOISBUYING? 9

4.0TRENDSANDMARKETPREDICTIONS 104.1AGOODINVESTMENT? 104.2SUPPLYANDDEMAND 104.3PRICESWILLCONTINUETOGRADUALLYINCREASE 104.4LANDPRICESWILLCONTINUETOINCREASE 104.5SPANISHBUYERSARECOMINGBACK 104.6INNOVATEARCHITECTURALDESIGN 104.7AGRADUALMARKETIMPROVEMENT 11

5.0SOURCES: 125.1MAGAZINESOURCE 125.2WEBSITESOURCES 12

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1.0IntroductionThe Andalucía property market is growing once again after the bubble burst in 2007-08. With prices staring to climb, we are entering a new era of modern design and construction in Andalucía’s most in-demand areas. Since there is a similar scenario throughout all of Spain and that the national economy greatly influences Andalucía, this market analysis will not only look at general market indicators for the Spanish property market, but also at key market indicators for Andalucía. Some market predictions will be revealed at the end of the end of the analysis. Enjoy!

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2.0KeyMarketIndicators

2.1.SalesVolumesDuring the last 12-month period to June 2016, 435,816 homes were sold in Spain nationwide. Sales the first quarter were 103,952 units. This is an increase of 13.2% against the previous twelve months. Although the figures show that the residential property market is starting to normalize after the economic downturn, the figures are still way short of levels reached during the boom years. The highest sales ever recorded were the second quarter of 2006 with 251,649 transactions. Andalucía and Cataluña are the two regions, within Spain, with the highest levels of sales – Andalucía leads the way with 23,853 transactions in the first quarter.

2.2Affordablepropertyprices While, according to all published indicators, prices are increasing again, price levels on a national basis are at approximately 2004 levels.

“Miraflores Hills”: 56 new apartments, completed and sold in 2003. The partners made about 100% return over the three year period.

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Q31992

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Q31998

Q32000

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House prices Index, Spain: (Source: Bank for International Settlements)

IPI Miraflores Hills started

IPI Miraflores Hills completed and sold

IPI Mijas Garden

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2.3IncreasingSpanishpropertypricesAccording to the Spanish statistical organization, Instituto Nacional de Estadistica (INE), Spanish property prices rose 4.2% in 2015, with new homes rising 5.8% and residential 4% (INE, 2016). Prices are expected to rise by between 3% and 5%. However, the increase in price is largely restrictive to five major cities and the surrounding areas: Madrid, Barcelona, Alicante, Malaga (in Andalucía) and Valencia. As seen from the graphs below, prices bottomed out in the spring of 2014, both on a national level and in Andalucía:

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2.4CompetitivepricingSince there has been very little construction in Andalucía the last 9 years, there is a shortage of newly built and refurbished properties. In addition, the most lucrative properties are already developed; making new-built and refurbished properties competitive in price. Most industry specialists believe that it will be some years before these properties increase significantly.

2.5TourismReal estate sales are intimately linked with tourism. According to reuters.com, Spain is the third most visited country in the world. In 2016 Spain hosted 75.3 million international visitors, up 9.9 percent from 2015. The number of total arrivals in Spain is manly driven by visitors from the UK, France and Germany. Andalucía is the third most visited destination in Spain, with 12.5 percent of the total arrivals. These figures would place Andalucía (if a country) about 25th in a world league of foreign tourist arrivals. This is much thanks to its renowned tourist destination Costa del Sol - one of the sunniest and warmest places in Europe.

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2.6Aqualityregion,atwelve-monthseasonAndalucía continues to be a low-rise, quality region with a real twelve-month season, which has little competition elsewhere in the European part of the Mediterranean. The modern Malaga airport offers direct flights to 125 worldwide destinations every week. The fast train, the AVE, puts Malaga City within two and a half hours of Madrid. In Andalucía, it is possible to visit historic cities such as: Seville, Córdoba and Granada with its ski resort, Sierra Nevada. Andalucía connects to Portugal in the west, which is only a five hours drive from Malaga city. And all of Morocco, across the Straits of Gibraltar, is just a short ferry trip away.

2.7AsafehavenAndalucía is considered a safe place to invest, and it is portrayed as a renowned area, especially within the European Union. This factor alone attracts hundreds of millions of euros of real estate investment every single year by investors from less secure parts of the world.

2.8HighyieldsEven though it is not as liquid as other types of investments, real estate has become a more attractive investment with interest rates close to zero. Reduced financial cost does give incentives to invest in the highly enchanting area of Andalucía.

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3.0GeneralMarketIndicators

3.1.FewerbankforeclosuresSince the financial recession in 2008, it has been a high number of permanent residences foreclosed by banks nationally. However, fewer foreclosures are registered in 2015. INE has estimated that the number of permanent residences foreclosed by banks nationally dropped by 13% in 2015 - another clear indicator of a market coming back to good health (INE, 2016).

3.2Decreasingunemploymentrate

3.3LowmortgageratesThe record low interest rates and fierce competition among Spanish banks, purchasers are motivated to obtain mortgages at historically attractive terms. The Euribor rate, considered the most important reference rates in the European money market, is currently below 0% for a one-year maturity.

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3.4Theeconomyisnowgrowingsteadily

Every single indicator, whether national, regional, or local, indicates the same improving market trend.

3.5Whoisbuying?In the fourth quarter of 2015, foreigners made up 13,18 % of all the property purchases in Spain. Of the foreign purchasers, the British were the largest single group by nationality. Norwegian purchasers made up a 3% share of the total number of foreign residential purchases (see chart).

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4.0Trendsandmarketpredictions

4.1Agoodinvestment?Considering that prices are still at 2004 levels, we believe that any property bought at a fair market price in 2016-17 will stand to give excellent capital appreciation over the next years.

4.2SupplyanddemandJust as the shortage in newly built units will influence the property market, so demand will remain strong much due to its attractive location. Andalucía, especially Costa del Sol, will perhaps become one of the most important areas in Europe.

4.3PriceswillcontinuetograduallyincreaseThe inverse relationship between low supply and a high demand for newly built units causes prices to gradually increase. One must remember that there has been very little construction in Andalucía for the last 9 years.

4.4LandpriceswillcontinuetoincreaseWell-priced plots in the best areas of Andalucía will become harder to find as the supply dwindles. Land prices in all categories have already increased and are set to continue its upward trend.

4.5SpanishbuyersarecomingbackAs we have seen from the property purchase graph above, the Spanish buyers are a very important segment, constituting an 86,82% market share. We believe Spaniards will gradually return to purchase property in Andalucía as the national economy continues its improvement over the coming years.

4.6InnovatearchitecturaldesignCreative new projects will be put on the property market, pushing the Andalucía real estate market into a new era of real estate. Much of the design will be eco-friendly, funkis-style with big windows and flat roofs. Again, one must remember that there has been very little new construction in Andalucía for the past 9 years.

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4.7AgradualmarketimprovementIPI Group believes that Andalucía will become one the most profitable areas in Europe to invest in real estate. We expect a gradual, balanced, healthy market improvement over several years to come.

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5.0Sources:

5.1MagazineSourceClover, Christopher. "Market Report 2016." Marbella Property Magazine Volume

8: p. 4-12.

5.2WebsiteSources"Bank for International Settlements." Bank for International Settlements. Web. 28

Jan. 2017. URL: https://www.bis.org Delmendo, Lalaine C. "Spanish Transactions Rising, Thanks to Foreign Buyers."

Globalpropertyguide.com. Web. 2 Dec. 2016. URL: http://www.globalpropertyguide.com/Europe/Spain/Price-History

"Foreign Tourists Visiting Spain at Record High in 2016." Reuters. Thomson

Reuters, 12 Jan. 2017. Web. 01 Feb. 2017. URL: http://uk.reuters.com/article/uk-spain-economy-tourism-idUKKBN14W19G

"House Price Index, Andalucia." Kyero.com. Web. 1 Feb. 2017. URL:

https://data.kyero.com/en/data/spain/community/andalucia/house-price-index

"Marbella Property Market Report 2016." Panorama. Panorama, 22 July 2016.

Web. 01 Feb. 2017. URL: http://www.panorama.es/blog/marbella-property-market-report-2016/

"National Statistics Institute." Instituto Nacional De Estadistica. (Spanish

Statistical Office). Web. 01 Dec. 2016. URL: http://www.ine.es/en/welcome.shtml

"Number of Sales in Spain Would Climb to around 450,000 Units in 2016 -

Investment Property in Spain." Investment Property in Spain. 14 Mar. 2016. Web. 22 Nov. 2016. URL: http://www.best-investments-spain.com/number-of-sales-in-spain-would-climb-to-around-450000-units-in-2016/news

"Spanish Property Sales for Second Quarter of 2016 Positive across Spain." !

Spanish News Today - Spanish Property Sales For Second Quarter Of 2016 Positive Across Spain. Web. 30 Jan. 2017. URL: http://spanishnewstoday.com/spanish-property-sales-for-second-quarter-of-2016-positive-across-spain_80514-a.html