Halfway through the year is a fitting time for a review of key property markets. We summarise conditions and pick out headline trends in our favourite destinations as summer 2024 starts to hot up.
Interest rate movement, taxation, property affordability, visa accessibility and regulation for rentals – factors that are constantly shifting and influencing foreign demand in international property markets. There are major elections to consider in the UK, in continental Europe and in the US this year too. In April, significant revisions to the EU’s green initiative, the Energy Performance of Buildings Directive (EPBD), requiring new buildings to zero emissions by 2030 amongst other things, could start to have an impact on markets. Just how much buying conditions in foreign hot spots are affected by all these things depends on the destination, so let’s take a closer look by country.
From top left clockwise: Spain, France, Portugal, Italy
Spain
Mirroring its football team at the Euros, the Spanish market is on the up and appears to be over the effects of interest rate hikes triggered by the European Central Bank in 2022. Multiple sources show average price rises during the first quarter of 2024 compared to both the previous quarter and the same period in 2023 (0.1 per cent and 3.3 per cent respectively according to TINSA, 0.8 per cent and 1.9 per cent respectively, according to Spain’s Land Registry).
Annual price growth is stronger in coastal areas populated by international buyers: 9.9 per cent in Málaga (Costa del Sol), 8.3 per cent in the Balearic Islands, 7.8 per cent in Alicante (Costa Blanca), 6.7 per cent in Santa Cruz de Tenerife (Canary Islands). These four provinces are also attracting the highest share of foreign sales. Foreigners accounted for 14.2 per cent of total property transactions (circa 159,000) in Q1 2024 – a historically high proportion, with Brits making up the largest group.
Steadiness is the buzzword for Spain this year.
Prices are expected to keep to a gradual upward curve. What to look out for? Stay informed about any new short-term rental controls, such as those in Barcelona, and keep an eye on the exchange rate, especially with the UK’s general election on 4th July.
France
Political unrest is never far from the surface, and France’s rising far-right party – to what heights remains to be seen – will inject some nervousness into the country’s financial and property markets. And let’s hope the repercussions of the snap election don’t dampen any feel-good factor from the Paris Olympics. Truth is the French property market generally has been in decline since the end of 2021, after its momentary post-Covid rebound.
Last year, the fewest number of resale homes were sold in France for 50 years, according to France’s National Real Estate Federation (FNAIM). In the year to the end of March this year, average prices across France fell by 3.8 per cent, the biggest drop for 15 years (FNAIM). The slowdown began in the big cities and has gradually spread to rural areas. FNAIM predicts that the average prices could fall by 5-7 per cent by the end of 2024, depending on what happens with interest rates.
There’s a silver lining to this slump especially as mortgage rates are expected to fall – the second half of 2024 could be an opportune time for foreign-buyers looking for a French bargain!
Portugal
More political shifting in Portugal. In March this year, a new centre-right government was voted in and immediately began abolishing regulations affecting the country’s housing and rental sectors (known as the Mais Habitação programme) brought in by the previous administration in October 2023. The end of last year also saw the cut-off for new applicants for the county’s attractive NHR tax regime, as well as the trimming down of investment options for its golden visa.
Read the latest on short-term renting in Portugal on Your Overseas Home
“The market is facing a phase of instability,” said Ricardo Guimarães, Director of Ci in the RICS report in May. “On one hand, future expectations are positive, driven by an improved interest rate climate and favourable economic outlook, especially at the national level. However, on the other hand, the sentiment around past activity points to a small decline in transaction levels, contradicting past and present expectations. Some players mention that the new governmental package of measures are causing buyers to postpone their investment decisions as they wait for those policies to be implemented.”
Signs point to things settling down now. Average house prices across Portugal increased 0.6 per cent during the first three months of 2024 compared to the previous three months, according to Portugal’s National Statistics Institute (INE). Year-on-year prices grew seven per cent for the period.
Looking at volume, total number of sales for Q1 2024 was down 4.1 per cent compared to last year and 3.1 per cent compared to the previous quarter. The total value of transactions was €6.7 billion for the period, 1.8 per cent less than in 2023. The Algarve accounted for 30 per cent of total volume and 25 per cent of value. These figures do show a gradual slowing down in price rises but also resilience. According to the RICS/Ci report, the outlook for house prices remains flat for the next three months (June-August) but positive with an uplift over the next 12 months.
Italy
As if the food and scenery weren’t enough, Italy is working hard to entice foreigners to its shores and boost property markets, primarily in less populated communities. Cue its highly-publicised one-euro house scheme, applicable to neglected hilltop villages and its attractive flat seven per cent tax rate for foreign retirees in southern regions.
Echoing its EU neighbours, Italy’s property market has been held back by expensive mortgages. Undersupply in desirable areas is maintaining value, especially in prime international areas, such as the Lakes, Rome, Milan and Florence.
Transaction levels continued on a downward curve (since Q3 2022) – the 154,700 recorded sales in Q1 2024 were three per cent down on Q4 2023 and seven per cent on 2023 (Agenzia Entrate). Average price growth is slowing in Italy though. In Q1 2024, the HPI fell by 0.1 per cent compared with the previous quarter but increased by 1.7 per cent compared with the same quarter of the previous year (Italian National Institute of Statistics).
According to a June analysis by leading portal Immobiliare.it, the most expensive Italian regions are Trentino Alto Adige (€3,403/sqm), Aosta Valley (€2,876/sqm), Tuscany (€2,529/sqm), Liguria (€2,673/sqm), Lombardy (€2,495/sqm), Lazio (€2,493/sqm), Sardinia (€2,317/sqm).
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