Offplan property is appreciating by two digits a year: The main difference between 2008 and 2022

Raymundo Larraín Nesbitt, December, 5. 2022

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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
1st of December 2022

As most buyers will have experienced, offplan property in Spain has appreciated by two digits nationwide over the las years. This is good, no? Let’s take a closer look at this and see what’s under the hood. We are going to compare it to 2008 to have a wider perspective of what is really going on.

2008

2008 marked the high point of Spain’s property bubble. Over 750,000 properties were being built a year and property prices were rising by 15 to 20%.

2022

In 2022 offplan property is appreciating on average by 10%, and in coastal areas by 20% a year. 150,000 properties are being built a year.

A closer look

Both figures look almost similar to what is going on in today’s market, yes? Actually, no.

The key difference is that in 2008 properties appreciated greatly driven by high demand. This pushed asking prices forward. I personally witnessed how investors were buying properties by twos and threes. It was simply a crazy speculative market fuelled by ultra-low interest rates.

Whereas in 2022 the increase in offplan prices are driven by high inflation, not by demand. The Covid-19 pandemic, and all its strains, have created serious disruptions in the global supply chain. Aluminium and other construction materials imported from China, and which are required by the offplan industry, are now taking much longer to arrive to Spain and have also greatly appreciated in price. Developers are forced to pass on this cost increase to buyers, which translates into higher asking prices. Meaning developers themselves are having to increase the sale price of their units every year only to break even because of the inflation spike (bubble) in construction materials.

Conclusion

To close, note that in 2022 FIVE times less offplan units are being built than in 2008 (150k vs 750k).

So, clearly the reasons underlying the huge spike in offplan asking prices are due to very different reasons.

At Larrain Nesbitt Abogados we have over 19 years’ experience buying, selling, and renting properties. We are also specialized in taxation, immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

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