Idealista.com released an article regarding the advantages of buying property in Andalucia. The following 8 facts have a big influence on the interest in this particular part of Spain:
- Ultra-low taxation. As we’ve covered before, Andalusia drastically reduced the taxes on buying property, making them less than most other areas of Spain. The Junta de Andalucía has also approved a batch of measures to cut down several other taxes, including inheritance, wealth, income, etc, making Andalusia a comparatively low taxation area in Spain, along with Madrid. And the last time I checked, Madrid had no beach, so the choice is easy.
- Ultra-low interest rates. Interest rates are now sitting at an all-time low, which enables would-be buyers to secure cheap loans at a fixed rate, which will become ‘cheaper’ as inflation rises, due to the capital owed to the lender becoming less in real terms.
- Pandemic & Brexit induced price reductions. The Covid pandemic and Brexit have forced many to have to sell their properties, temporarily increasing the supply of property, and giving buyers more alternatives and an ability to negotiate down their prices.
- Property boom. Now that April’s tax cuts are permanent, it's already leading to more activity, which will remove the surplus supply and eventually lead to price increases (on average 8.4% on coastal areas over the last year). This means that now is the time to buy, especially if it's intended as a resale property. It should be highlighted that in some exclusive coastal areas, such as in Marbella, property prices have risen by over 30% over the last two years.
- Increased inflation. This means that your cash in the bank has less buying power as the prices of the things you want to buy rise. Traditionally, taking on a mortgage loan and investing in real estate has been seen as a way to protect your savings against this rising inflation. Although financial authorities the world over state that the surge in inflation is merely transitory, the amount of quantitative easing, ‘new’ money that has been printed in the world, must mean that each currency note is worth less. Taking on a mortgage loan, and investing in real estate, was a strategy that many followed in the 70’s, during a time of high inflation, which in hindsight maintained and increased their wealth.
- Property rental. Depending upon the purchase price and any controls on rent, the income and capital appreciation can be sufficient to cover the costs of loans and still permit periods for the owner to enjoy the property too. Brexit has made it more difficult due to costs not being able to be deducted from rent before tax, but for EU citizens and special tax reduced investment funds, it can be a (very) profitable business as a landlord can deduct 70% or more of the property-related expenses.
- Pound rally vs. Euro. Sterling based buyers may also have the temporary benefits of better exchange rates giving them more euros, and therefore property, for their pounds, if the Bank of England increases its base interest rate. It could be short-term however, as any advantage will disappear should the European Central Bank also increase its base rate.
- Gorgeous weather. Andalusia averages 330 days of sunshine a year with an average temperature of 17º. You really can’t argue with that.