How does the Ukraine-Russia war affect the Spanish real estate sector?
March 17, 2022
Consequences in the Spanish residential market
Industry experts believe that the economic sanctions against Russia, which are being used to isolate the country, will have little impact on the overall market for foreign property sales in Spain. Rents in certain areas will be impacted. However, other specialists recognize that in the markets where Russians invest, such as the coastal areas of the Balearic Islands, Valencia and Andalusia, the war situation in Russia will be noticed. The greatest impact of the sanctions will be reflected in the vacation rental market and in the tourist flats in these geographical areas.
There is also the view that the invasion of Ukraine will affect the Spanish construction sector, as gas and oil prices have shot up, which will undoubtedly raise inflation and increase the cost of other raw materials (where the increase in costs will be between 20% and 25%). Many of the imports from Russia are indispensable for construction.
In turn, domestic housing demand will be affected by the international context, but with a lesser effect than expected. Inflation will become structural and younger homebuyers will be the main ones affected by the war in Ukraine, because if salaries grow at a rate of 2% per year, prices grow at a higher rate, which leads to a rise in mortgages and rents, making access to housing more difficult.
The General Council of the COAPI of Spain assures that “operations are still in progress and Spanish families have not stopped buying, selling or renting, due to the conflict between Ukraine and Russia, for the time being”. However, the organization warns that “the influence of the war on the investment sector, which for the moment is on standby, is noticeable”. Nevertheless, the real estate market in Spain remains stable and is operating with confidence at the moment.
The luxury real estate market
If Russians have been characterized for something, it has been for their millionaire investments in our country, especially in the high-end real estate sector.
Of the 61,000 homes bought by foreigners in the same period, Russians only represent 2.1% and the weight of Ukrainians is even lower. Most of the acquisitions by Russians were made by citizens with medium-high purchasing power on the coast and as second homes. According to data from the National Institute of Statistics, at the end of 2020, there are already 82,000 Russian citizens living in Spain and another 107,000 Ukrainians.
As for the areas preferred by Russians, a distinction must be made between first and second homes. For first homes, Russian buyers choose premium areas in large cities (high-end houses and penthouses). Second homes purchased by Russian citizens are located in coastal areas, such as the Costa Brava, the Costa del Sol and the Balearic Islands. The most sought-after properties are exclusive estates with sea views, the most valued attribute.
Given that the percentage of these buyers is very low in relation to the total market, real estate experts do not believe that there is a negative impact, as we are in an attractive place for those people who are not safe in Russia or Ukraine and who want to choose to settle here (where they may have their friends and relatives).
The foreign buyer
As a consequence of fear and uncertainty, as well as the blockade and economic sanctions applied against Russia, there has been a sharp drop in a very important part of the transactions carried out by Russians and Ukrainians. All these policies make it extremely difficult for these two nations to carry documents, personnel and money from these two countries to our country. Since the beginning of the conflict, more than a week ago, no transaction has been closed by Russians in Spain.
The war started between Russia and Ukraine will have an inevitable influence on the Spanish and Catalan economy and, therefore, also on its real estate market. The relationship between Catalonia and Russia has been consolidating for a decade due to the high interest of Russian homebuyers in the region, especially in Barcelona capital and the Brava and Daurada coasts. For this reason, the Catalan real estate sector is following the evolution of the conflict with special attention in order to be able to anticipate the impact it may have on the market.