Are you looking for reasons for investing in properties in Barcelona? In this article we will talk about the main things you should know before putting money in this market.
Both property values and rental prices in Barcelona have increased significantly since 2014 and the Barcelona property market has returned to being one of the most buoyant in Spain, after a dip during the worst period of the Covid-19 pandemic. So, we will explain you why it is a good time to buy property in Spain (especially if you are a foreigner), what is the forecast for the Barcelona real estate market in 2023, and all this applies whether you want to buy property in Spain being an American, or you simply want to make a real estate investment in Barcelona for professional reasons.
Is Barcelona a good place to invest?
Barcelona has long been a safe choice when it comes to investing in real estate. Property markets are notorious for having peaks and troughs and the Catalan capital is no exception. This being so, investors looking to weather any dips in the property market will have found that their patience pays off in Barcelona a little more than in other markets.
In addition, the Catalan city stands out for having different areas with very different socio-economic levels. That is why in our luxury real estate agency, we have carried out different articles in which we talk about the most expensive apartments in Barcelona, on the one hand, and for those who live in an apartment are too small, we have made a selection of our most expensive houses in Barcelona, so you can compare and choose the type of housing that best suits your needs.
Will property prices fall in Barcelona?
While living in the city has many advantages, when we look at the statistics of the last 15 years, in June 2007 prices in the city of Barcelona reached a peak of 4255 €/m2 and in December 2012 they bottomed out at 2971 €/m2. At the end of December 2022, prices stood at an average of 4058 €/m2, 3.2% more than in the same period of 2021 and well above the national average (1921 €/m2). For the moment, no analyst has predicted a real estate slump, but rather a correction.
Why invest in Barcelona?
The next few years will be difficult for all real estate markets due to crisis of the cost of living in Barcelona and the war in Ukraine, but, despite this, investing in a market with a proven track record can be a smart decision, taking all factors into account. Let’s look at 8 of them.
1) Good mortgage rates still available
Compared to the last 20 years or so, mortgage rates are extremely competitive, which means that if you fix your rate now, you’ll know exactly how much you’ll be paying for years to come, and will be paying the same amount every month. This gives borrowers the ability to plan for the future, alongside a sense of security. With a mortgage, you often end up paying much less per month than you would if you were to rent the same property and whilst there is an upfront down payment (normally about 20%), it’s not just a home but also an investment, especially if you choose to make home improvements over the years.
“Whilst these things are difficult to predict correctly, our guess would be that rates will go up further during 2023, but less sharply than we saw last year” explains Kevin Monger of Mortgage Direct. “Inflation should be under control towards the end of this year and growth should return to the Eurozone after what could well be just a mild recession, helped by China opening up more having ended its zero-Covid policy and also economies becoming less and less reliant on Russian gas and oil. We can imagine the ECB reducing interest rates slowly from early 2024 and the Euribor would then start to fall. We can’t see rates returning to below 2% as they had been up until Q2 last year, but we do feel they will stabilise and then fall slightly over the next couple of years. We certainly hope things pan out this way, but there is obviously still a lot of uncertainty due to the ongoing war in Ukraine.
We have had a fantastic start to the year and inquiries are up 40% so far compared to the monthly average for Q4 2022. Interest rates remain lower than previous record highs, house prices, and therefore how much it costs to buy a home in Spain, remain reasonable, and the Iberian peninsula remains a very popular destination to live or own a vacation home, so we expect demand to be strong this year. Thirty-five percent of our signings this year so far are from investors, which is a very positive sign.”
The current best fixed rate deal with Mortgage Direct is 2.5% for 2 years.
2) Healthy rental yields
Barcelona has experienced a high demand for rental housing, especially in recent times with the return of business travel and the influx of foreign students and workers (specifically that profile of foreigners who want to live in Barcelona as expatriates), which has led to price increases in the rental market and improved profit margins for investors. The rental price per square metre per month in Barcelona averages at 21.8€, making the Catalan city the most expensive place to rent in Spain according to The Living Property Telescope 2022. According to the valuation platform Tinsa, the neighbourhoods that offer the best rental yields are Nou Barris (4,7%), Ciutat Vella (4,5%), Horta Guinardó (4,4%), Eixample(4,3%), Sant Andreu (4,1%) and San Martí (4,1%). The average rental in Barcelona is around 1200€ but increases significantly in centrally located locations and new builds. New legislation for 2023 has prevented landlords from raising existing rental charges by more than 2% for contracts that need to be renewed between April and May .
Property investors who are looking for protection against the volatility of stock markets often look to apartment rentals as a guard against inflation. 2023 will be the first full year without any Covid restrictions so price corrections for rental homes should be minimal, especially if they are centrally located or are new builds.
3) Spain will avoid a technical recession in 2023
According to the International Monetary Fund (IMF), not only will Spain be one of the few European countries to avoid a ‘technical recession’ in 2023 (when GDP falls for two successive quarters), it is expected to be one of the fastest growing economies in the Eurozone with forecasters predicting an increase in output of 1.2% – compared to 0.3% for the UK, 0.7% for France and – 0.3% for Germany. As demand for property is dependent upon household income, this small but significant economic growth means people will be able to spend more on homes, which in turn increases demand and pushes up prices. Catalonia averages around 20% of Spain’s GDP and is significantly higher per capita than the rest of Spain (approx. 29,000€ compared to 23,000€). According to research by BBVA, in 2022, Catalonia’s GDP increased by 5.2% and they are predicting an increase of 1.5% next year and 3.6% in 2024, allowing the creation of more than 150 thousand jobs. So if you are a foreigner and you are looking for how to find a job in Barcelona, maybe now is your chance. This way, you can afford to live in one of the best cities in the world, in one of our high standing homes like the ones we have in our list of luxury apartments in Barcelona. Among all the properties that you can find on our website, you will find from coastal homes (ideal if you are one of those who like the sea breeze), to luxury homes and mansions in Barcelona (more located in the upper area of the city).
4) Strategically situation with an unrivalled quality of life
Sometimes coined as Europe’s leading ‘Urban Resort’, both geographically and climatically Barcelona pretty much ticks every box. The Catalan capital is sandwiched between the hills and the Mediterranean with very little land to expand on. Building upwards is fraught with restrictions meaning Barcelona property will forever be at a premium given the scarcity of what can logistically be available and which over the long-term should increase in value. Its near perfect climate is characterized by long warm summers and mild winters with the ski slopes of the Pyrenees just a couple of hours drive from the city centre. The ultimate lifestyle destination, Barcelona has consistently been a magnet for locals, foreigners and for start-up and tech employees alike (in fact many of them are located in luxury penthouses in Barcelona). It is a city which combines cultural diversity, dynamic industries and unparalleled beauty both in its architecture and natural surroundings.
5) Well connected
Located just 16km from the city centre, Barcelona’s International airport offers low cost flights to all the major cities in Europe within around three hours. You can also get long haul flights to destinations such as the US and Latin America. There is an efficient train network with the fast speed AVE getting you to Madrid in just over two and a half hours and Paris under 6 hours. The modern and cheap metro and bus system is air conditioned and takes you to all corners of the city and, for those who want to exercise whilst they get around, there is also the BCN Bicing initiative which now incorporates electric bikes. Barcelona WiFi is one of the largest networks of free internet in Europe.
6) A burgeoning Fintech & start up hub
In recent years Barcelona has become a leading European Fintech and start-up hub offering many attractive business and investment opportunities. It is also one of the world’s leading Smart Cities, applying technology to enhance the benefits of urbanisation for its residents. Barcelona has been producing innovative startups for a number of years, from early-stage to unicorn heights and is currently home to nearly 2000 new businesses. Glovo, Wallbox and Typeform among numerous other now established brands are all based here, thanks to millions of euros invested from Venture Capitalists. Barcelona even has its own innovation neighborhood in Poblenou known as 22@, created from 200 hectares of regenerated industrial land and home to hundreds of creative and tech industries including Meta and Amazon.
7) Attraction of talent
Barcelona boasts some of the best international schools in Europe including The British School of Barcelona and The American School (in fact in another article we have already told you about the best international schools in Barcelona), both of which consistently rank highly for academic results. The top 3 universities in Spain are also based in Barcelona (The University of Barcelona, Autonomous University of Barcelona and Pompeu Fabra University), according to Times Higher Education. The city is home to two of the most prestigious business schools in the world – IESE and ESADE and much of the talent tends to stay. Thanks to its enviable lifestyle, cultural integrity and strategic geographical location, Barcelona appeals to almost everyone, including the world’s top talent (see point 6). The ability to attract a dynamic international workforce has meant the city has been able to shift mindset to a modern, progressive outlook, and has transformed itself into a sought-after European base for entrepreneurs and digital nomads. Spain’s new Startup Law will further enhance this, offering legal and fiscal improvements to both professionals and investors.
8) Long term investment
“Investors – both international and local – could well seize Barcelona property investment as a long-term oportunity in 2023. While prices are expected to fall or stabilise at best, the slump is not predicted to last more than two years. After that time, the first months of 2023 could appear as a golden opportunity and the last chance to buy in before Barcelona real estate prices return to levels not seen since 2007/2008”, concludes Francisco Nathurmal, founder and CEO of Bcn Advisors: one of the best real estate agency in Barcelona.