One in three foreign home buyers in Spain finance their purchase in our country, and two in three pay in cash. According to Engel & Völkers Finance Spain, the reason for this is that the mortgage offer is more competitive than what they can find in their home countries. The company explains that financial entities are tremendously active in their mortgage offers. “It is not difficult for us to be able to manage fixed rate mortgages below 3%, and mixed three- and five-year fixed rates even below 2% for our Spanish and international clients,” details Luis Nicolás Fernández, CEO of Engel & Völkers Finance Spain.
Although there are indeed more “cash” operations in the high-end residential market than in the middle-income segment, clients with high purchasing power are the first interested in financing their purchase, maintaining their investments without becoming decapitalised and assuming the fiscal impact of undoing such investments.
“The rise in interest rates does not significantly affect their debt ratios or effort rates,” adds the CEO of Engel & Völkers Finance Spain, which has been operating in the country since mid-2023. Moreover, the options to finance at a fixed rate below 3% make it very interesting to apply for a mortgage loan or other financing alternatives to purchase a home in the prime segment.
This practice is also observed among international clients, who find it very attractive to seek financing in our country and maintain their investments. They generally have a much higher purchasing power than the Spanish average, especially within the high-end residential segment. For Engel & Völkers Finance, international clients are particularly interesting, since they represent more than 70% of buyers in cities such as Barcelona and Madrid and on islands such as Mallorca and Ibiza. This is why it has designed an exclusive service with expert, multilingual financial consultants who accompany buyers throughout the entire home acquisition process.
In general terms, the typical Engel & Völkers Finance client profile is a Spanish or foreign individual with a medium-high income, high or High Net Worth Individuals (HNWI) – executives, specialists, businessmen – who want to buy a primary or holiday home or an investment property in Spain. On average, they spend between €700,000 and €4m. “Of course, we have a financial solution for larger projects through our agreements with entities specialised in private banking,” says Luis Nicolás Fernández.
“We provide each client with a bespoke offer; we look for the financial solution that best suits their needs, expectations and project. From the most classic financing based on a fixed, mixed or variable rate mortgage, to more specialised solutions with Lombard loans, or specific private banking proposals for HNWI who want to buy special or unique residential assets,” says the CEO of Engel & Völkers Finance Spain. They have agreements with entities specialising in Spanish and international wealth management and private banking that allow us to propose innovative solutions adapted to the needs of this most demanding client profile with more exclusive projects.
Forecasts
In 2024, barring unforeseen events, all analysts agree that the mortgage market will have softer declines than in 2023, mainly because Euribor will maintain a slight downward trend in the coming months. The most optimistic analysts point out that at the end of 2024, we will have a Euribor of around 3.25%, and by 2025 around 2.75%. However, it must be noted that with the current scenario of international uncertainty, it is difficult to make forecasts. Luis Nicolás Fernández believes that in much of 2024, we will find a Euribor of around 3.6%-3.4%.
The profile of the foreigner looking for mortgages in Spain
According to the latest annual report from idealista/hipotecas, idealista's mortgage broker, the profile that requested financing to acquire a property in 2023 is a foreigner with an average income of almost €6,000 per month who is looking to buy a house for an amount of about €213,000, 20% higher than the national average, and which is located mainly in the Mediterranean, with the Valencian Community being the reference region.
After analysing the operations that it brokered last year with its service for non-residents, the idealista mortgage broker states that foreigners represented 5% of the total mortgage demand for the whole year, with a weight similar to that of mortgages for buying second homes (7.5%). However, it was far from the operations aimed at improving the conditions of the initial mortgage (13.3%) and those signed to buy a primary home (72.9%).
The figures associated with foreign mortgage applications leave some curious readings, i.e. the amount requested or the property price closed in 2023 at the highest levels of the last two years, when the idealista/hipotecas series began mortgages.
Another variable is that the economic effort made by foreigners to buy a home is 21%, four points below the Spanish average, while Brits continue to be the reference nationality, although followed at a short distance by the Germans.
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