Foreign home sales and rentals stall in Spain, forum users say

Foreign home sales and rentals are stalling, according to a forum debate

One user says a friend of his is selling off-plan on the Valencian coast. According to his account, he laughs at every deal he closes, because he believes the buyer is paying double what the apartment is worth. A few months ago they hired a Russian woman to attract clients from her country. She lasted two or three months. Then a Venezuelan came in to sell apartments to Latin American buyers. Nothing. The latest hire hasn't worked out either. The anecdote, told on an economics forum, is used to illustrate the state of the market: according to some participants, foreign purchases are falling and the people who sustained the business are starting to disappear.

Who was buying, and why they've stopped

The official story says Spain is a magnet for foreign capital. The debate argues the opposite. The international buyers who sustained the coastal areas —British, German, Nordic— would have pulled back. In their place would be harder-to-place profiles: Italian and Dutch passport holders who don't always fit the stereotype, as commenters in the thread put it. Some argue that part of that residual demand has more to do with opaque activities than with retirees looking for sunshine.

The consequence, according to this account, is direct: if the foreign buyer withdraws, the stock piles up. And the Spanish seller cannot absorb it at current prices. Wages don't stretch to what's being asked.

The landlord who pulls the apartment out of the rental market and puts it up for sale

The other front is internal. Restrictions on traditional rentals —rent caps, forced lease extensions, legal uncertainty— would have pushed thousands of small landlords to change strategy. Figures circulating in the sector mention 2,067 homes withdrawn from the standard rental market, another 1,224 switched to the sales market and 944 diverted to other rental arrangements, such as renting by the room or seasonal lets.

The logic is simple: if you can't raise the rent or get the apartment back when you need it, you sell it. The problem is that selling isn't free. Transferring a property is always costlier than holding it: between capital gains tax, taxes and transaction costs, an ordinary sale loses a fortune along the way. Selling only makes sense when you need liquidity or when you're repositioning. Selling for the sake of selling is a bad deal.

Why don't prices fall if supply is rising?

Here's the crux of the matter. If apartments are pulled from the rental market and put up for sale, the supply of homes for sale goes up. If, on top of that, foreigners are buying less, demand falls. In theory, prices should come down. In practice, they don't. Why?

Because selling isn't urgent for most owners. The average Spanish owner is in no hurry. They can wait. And waiting is free, or nearly so: property tax, community fees and special levies get paid either way, but the apartment is still there. Some argue that neither the State nor the banks want a sharp fall in prices, because it would wreck their balance sheets. So the market freezes: nothing sells, nothing drops.

The result is a gridlock. Apartments are hidden away, as a phrase doing the rounds on the forums puts it. They don't disappear from the records, but they don't come onto the market at realistic prices either.

The profile of the buyer who's left

If foreigners are pulling out and Spaniards can't afford to buy, who's buying? Three profiles remain. First, the investor who needs to place money and finds nothing else. Second, the heir who receives an apartment they don't need and sells it to pay off debts. Third, the squeezed small owner who sells to avoid drowning.

None of the three sustains a market. These are forced or opportunistic sales, not structural demand. Spanish property rests on a demand that no longer exists.

What's coming

The conversation on the economics forums has been circling the same point for months: whether the market will hold or whether this is the start of a correction. The pessimists talk about third-worldisation and say the story that half the world wants to move to Spain no longer washes. The optimists hope the State will step in to prop up prices, though nobody explains how.

Meanwhile, the figure repeated in the thread is that foreign purchases are falling, with no official records to confirm it. And those selling off-plan on the coast no longer know who to sell the next apartment to, according to the forum account.