20% of all foreign capital has been invested in Spain
All property-related activity has accounted for 20% of all foreign investment between 2014 and 2018. Real estate in Spain is still the most attractive sector for foreign capital, although since 2015 - when a record figure of 8,659 million euros was reached - investment has fallen. In the first half of 2019, 1,069 million euros were recorded, according to ABC.
In the last four years, foreign investors have paid 29 billion euros into Spanish real estate. This activity is undoubtedly the sector that has managed to raise the most money outside the borders of Spain. Next on the list, somewhat further behind, is the logistics industry (not linked to real estate) which contributed 11.3% and the supply of electricity and gas at 10.2%.
These data reflect the historical importance of the housing market for the Spanish economy. But this trend has begun to show signs of change in recent years. In 2018 it became the second investment option for foreigners and during the first half of 2019 the third preference, signs that real estate may be losing its attraction for capital coming from outside our borders.
There are two main reasons for this decline. The first is related to profitability. During the financial crisis, investing in property ensured high returns because the price of assets was at rock bottom and future forecasts predicted a gradual recovery of the sector. This improvement has already begun to peak and has generated a less attractive context for foreign capital.
In addition to this economic outlook, there is also another factor that has damaged this sector outside Spain. The political instability in which the country lives with two general elections in less than six months and no stable government for more than a year is off-putting for foreign investors. This is a situation that, along with the ongoing tensions in Catalonia, has clearly alienated foreign investors. Precisely, the issue of Catalonia's independence has meant that the money destined for real estate travels to Madrid. The facts don’t lie in this regard: between 2016 and 2018, foreign investment in the Madrid real estate sector shot up by 133%. In Catalonia, however, it plummeted by 61%.
Things to know if you want to invest in real estate in Spain