Foreigners applying for mortgages in Spain earn €6,000 and search for houses that are 20% more expensive

Every year, tens of thousands of foreigners buy a home in Spain, regardless of whether they need to apply for a mortgage.

The profile of foreigners who need to buy a property with bank financing and formalise their loan in Spain is included in the 2023 idealista/hipotecas annual report, which details its main economic characteristics, the most prominent destinations for buying a home and what type of loan they sign.

After analysing the operations it brokered last year with its non-residents' service, 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%), although far from the operations aimed at improving the conditions of the initial mortgage (13.3%) and those signed for the purchase of a primary home (72.9%).

As for the profile of the foreigners, they are 41 years old, with an average household income of more than €5,900 per month and want to buy a house costing around €213,000, a price up to 20% higher than the national average. The Mediterranean area remains the most prominent, while the fixed rate remains the preferred choice for homebuyer financing. 

Their financial effort to buy a home is 21%, four points below the Spanish average. The British continue to be the reference nationality, although followed at a short distance by the Germans.

Higher rent and more expensive homes

One of the figures included in the idealista/hipotecas report is that non-residents who requested a loan to buy a home during 2023 had an average household income of €5,897, 85% higher than the national average (€3,177).

Regarding the price of the property they want to acquire with this financing, the average among foreign consumers was above €213,000, 20% higher than the average in Spain (€176,663). As for how much mortgage they ask for to carry out the operation, data from the idealista broker places the average at €152,518 for foreigners and €136,959 for Spanish nationals.

If we analyse formalised operations, the differences between rent and housing prices are even higher. The average income of foreign households reached an average of €9,223, more than double that of national mortgage holders (€4,405 per month). Meanwhile, the average purchase price was around €326,000, 27% higher than that of the properties that Spanish buyers acquired last year (€256,970).

However, the difference is less in the mortgage amount: the average for foreigners was €185,848, while Spanish families signed mortgages of about €175,500.

Considering that they request practically the same financing but that foreigners have double the income, their economic effort (understood as the income allocated to paying the monthly fee) stood at 21%, compared to 25% for the Spanish. Both profiles are below the maximum of 30-35% recommended by experts.

Record application levels

The mortgage application figures for foreigners make for some curious readings. For example, the amount requested or the property purchase price closing 2023 at the highest levels of the last two years, when idealista/hipotecas records began.

As a result of the price increases recorded in the residential market, the average purchase amount of homes that non-residents wanted to finance exceeded €221,000 for the first time in December (compared to €213,000 on average annually), while the average mortgage requested is already close to €160,000 (the average for 2023 was €152,518).

However, the income of foreigners who request a mortgage loan in Spain has not broken records: although the average was above €6,100 per month in December, the highest figure was the one recorded in July, with almost €6,200 a month.

The preferred destination: the Med

As for the homes' location, there are no changes to the usual trend. Most properties in demand and purchased via mortgages are located in the Mediterranean.

According to the idealista broker, more than 27% are located in the Valencian Community, while 32.8% are distributed equally between Catalonia and Andalusia (with 16.4% in each case).

The Mediterranean area not only stands out in the transactions signed but is also where the highest volume of mortgage applications by foreigners for home purchases is concentrated. In this case, the weight of the Valencian Community rises to 28.2%, while Andalusia occupies the second position (20.7% of the total) and Catalonia third (14.7%). The Canary Islands (9.48%), Madrid (9.43%) and the Balearic Islands (5.36%) are the following most prominent regions in the ranking.

As for Spanish mortgage holders, the Community of Madrid is the leading autonomous community, encompassing a third of the mortgages to purchase a home in 2023. Catalonia, Andalusia and the Valencian Community are the next most active regions in the country, although with fewer numbers.

The British continue to lead

The British continue to lead the ranking of foreigners applying for mortgages, representing 15.5% of the total. Germany follows closely (14.1%), while Swiss citizens conclude the 'top 3' (accounting for 9%).

Americans (8.9%), French (7.8%) and Dutch (7.3%) also stand out. Below 6% are the Irish (5.5%), the Belgians (4.5%), the Swedes (2.7%) and the Italians (2.3%). Other nationalities make up 22.5%.

Although the United Kingdom remains at the top, Germany is gaining weight in the ranking. In the third quarter, German citizens were the leading mortgage applicants to buy a home in Spain.

The report also makes special mention of applicants from the United States and Switzerland since they are the ones that registered the highest average income per household (€9,527 and €9,097, respectively). They also demand higher mortgage amounts (€175,585 for the Swiss and up to €184,090 for the Americans) and want to buy the most expensive homes (between €247,000 and €258,000).

Foreigners need less financing to buy

As a general rule, the mortgage amount requested by non-residents was equivalent to 61% of the homes' purchase price. By financing bracket, the 60%-70% bracket stands out, which comprised more than half of the transactions (55%). Next was 50-60% (almost 19% of the total), followed by up to 50% financing (16.1%).

Barely one in 10 foreigners needed to finance more than 70% of the property price, with only a small number of transactions exceeding the 80% threshold banks generally set as a limit (0.7%).

Here, we find another difference with the average Spanish mortgagor. According to the idealista broker, one in five Spanish consumers took out a loan for between 80% and 100% of the property price. Specifically, 20.2% of transactions were between 80% and 90%, while the remaining 0.8% were in the 90-100% range. However, the most prominent range was 70-80%, with 43.2% of transactions.

Foreigners prefer fixed mortgages

Fixed mortgages continued to be the most preferred by foreigners in 2023 after representing almost 70% of the operations formalised last year through idealista/hipotecas (69.6%). Mixed types were second (19.6%), while variable mortgages remained the least common option (10.8%).

As for Spanish customers, the fixed rate was also the preferred option (52%), although it was not so far ahead of mixed mortgages (40%). Mixed interest rate mortgages, which establish a fixed rate for the first few years (three, five, ten, etc., depending on the bank and the offer) that are then converted into a variable rate (differential + Euribor), have grown significantly. In 2022, they accounted for just 12% of the total.

Furthermore, they were the first option in operations to improve the initial mortgage, either via subrogation or by cancelling the mortgage and taking out a new one. They accounted for almost 55% of the total, compared to the 35% represented by fixed mortgages.

>> Consult idealista/hipotecas 2023 annual report here