Real estate status in the Valencian Community.

The beginnings.

We began the 2022 financial year with the well-deserved longing for a return to general normality, where the word pandemic was presumably expected to gradually disappear from our vocabulary and cease to mark the rhythm of our daily routine.

However, our joy fell into a pit! And at the beginning of the year, the Ómicron variant appeared, much more belligerent than its contemporary variants, rapidly increasing the contagion rate in Europe and negatively impacting tourism figures in Spain.

In quantitative terms, according to the Exceltur sector association, tourism GDP fell by 15.8% in Q1 of the year compared to 2019, with January being the most pronounced month of the quarter, although this trend has already been modified in March, due to to an increase in demand, which marks the path of recovery in this second quarter.

World situation.

At the same time, already at the end of last year we saw galloping figures of underlying inflation for energy components (Gas and oil) which had a very negative impact on the operating costs of the sector and reduced the income statement of tourism companies, by not be able to pass on these costs.

Geopolitically, the war in Ukraine has only fueled the rise in energy prices on the markets (+28.3% on average since the outbreak of the war on February 24).

Also the uncertainty in the medium-term travel demand of European tourists, especially Russian tourists (low-impact effect due to their low weight within the total number of tourists who visit us).

Positive evolution of tourism.

All in all, as we approach the traditional periods of tourist intensity, we are seeing a change in the positive and upward trend in the number of hotel reservations that lead us to numbers very similar to those before the pandemic, and invites us to be optimistic, but given this macro scenario, it is very difficult to predict, even a little, how we are going to end this year.

In contrast to this uncertainty and volatility in the tourism sector, we find the real estate market, and more specifically, that of the Valencian Community.

According to sources consulted (Report from the Association of Real Estate Agents of Valencia) 24,305 new sales were registered during the 1Q of 2022, which means the best result since the 2nd Quarter of 2007!

With an average revaluation of the home of over 6.72%, profitability well above the annual return of the Ibex 35.

New housing bubble?

It is evident that in a scenario of high volatility in the financial and commodity markets, real estate assets located in areas of high tourist demand become the favorite investment vehicles of all kinds of investors (individual and institutional investors), since which are tangible assets, which generate more than interesting returns for their vacation rental activity and generous returns when they are transferred.

According to the Idealista real estate portal, the average price per square meter in Alicante stands at €1,768/m2 in April 2022, which represents an increase of 8.4% compared to April 2021.

But, if we look at towns like Benissa, things are even more succulent: the historical trend of house prices in this town (and nearby areas such as Jávea and Moraira) have always followed an upward trend and the average price per meter square is situated at €2,733/m2.

We compare prices.

If we compare it with more traditional markets, such as those of Malaga, San Sebastián or Ibiza, we see:

-Average price m2 Malaga: €2,542/m2 with a more marked positive evolution in recent years

-Average price m2 San Sebastián: €5,006/m2 with a less pronounced and linear trend. Which makes it a mature market with little possibility of consolidating capital gains.

-Ibiza average price per m2: €5,169/m2, the latter with a price trend with a sharp rise since 2016 but which has peaked as has the Basque market.

Compared to these markets, the real estate market in the North of Alicante is a market at a very attractive price, equipped with all the necessary infrastructures required by a mature, developed and competitive investment and tourism market.

Expert opinion.

With an increasingly emerging market of Belgian and Dutch citizens, the towns of Benissa, Moraira and Jávea are ideal locations to invest and exploit in holiday tourism.

To cite an example, a villa priced at €800,000 can generate a risk-adjusted rate of return of over 5% with much less volatility than any bond or financial asset. In addition, capital gains of over 10% could be consolidated in just one year given the incipient demand and high turnover.

The leading global vacation rental management company in the sector, Abahana Villas, has been successfully managing real estate assets in the area since the year 2000 and has at its disposal a whole portfolio of properties with an objective and adequate valuation for what Search as an investor.

You can purchase your new villa with the security granted by your technical team of tax and tax advisors, advising you throughout the purchase process and tax planning.