I knew it had to happen. I just didn’t imagine that it would happen as quickly as it has. I’m talking about the expat impact on real estate in Valencia. This little paradise is now being discovered by more and more people ( I am also to blame). That has made it attractive to a lot of ex-pats as a place to call home.
Expat impact on real estate in Valencia Spain:
The impact on real estate has been immense. Prices have skyrocketed, even from about four years ago when we moved here. In the past year, there have been more Americans moving to Valencia.
The Americans have overtaken the Brits by a large margin, I am assuming thanks to Brexit which has made things a bit difficult for them in terms of financial requirements and attaining legal status, things that had been of no consequence to them (welcome to the real world!).
For simplicity´s sake, I will limit my blog post to the expat impact on real estate rentals as opposed to purchases. I have always advised newcomers to rent before buying as there are so many moving targets, and once you’ve bought, you might be stuck there for a while as it takes time to sell up.
Things are not like in the states where you put a place for the sale and have multiple offers within days. I knew a poor woman in the Malaga area whose house had been on the market for four years when we met her, and by the time we moved, she was still hoping to sell and was going to lose money on the deal.
How did rental prices increase in Valencia?
Here are some of the reasons why l think the real estate prices in Valencia, and indeed in other big cities have had a steep upward trajectory and show no sign of slowing down as more people choose to explore other countries to call home.
The Crisis:
In order to understand what has happened with the explosion in price increase, we need to realize that this happened post-economic crisis that affected the whole world culminating in 2008. Boy, the party ended with a quake that rumbled all over the world. Just thinking about it makes my stomach churn. It was a horrible time.
Prior to that, it was easy to get mortgages with no money down. Once the meltdown occurred, a lot of houses and flats were repossessed by the banks from the owners who could not afford to repay their loans. The banks then started requiring potential buyers to put down portions of the loan amount which meant fewer buyers and more people pushed into the rental market.
This resulted in a jump in rental prices. About 50% jump for the country as a whole. Palma, Barcelona, Madrid, Valencia, Tenerife were among the leaders. Wages, on the other hand, have increased an average of 1.6%. It’s therefore easy to see why locals who own apartments in popular ex-pat areas choose to rent them to foreigners while they live further outside of the cities.
Cheap to us mentality: expat impact on real estate in Valencia
One of the biggest expat impacts on real estate in Valencia has been cheap to me mentality. Expats are here physically, but not mentally. What l mean by that is while people are here, they still price things as they did back home.
For instance, someone was paying $3,500 a month for a three-bedroom apartment in Boston. They move here and jump at an apartment of equal size that is only priced at €1500 per month! What a bargain compared to the old price!!! Wrong!!! You have to compare to prices here, where more than likely it is like paying $5,000/month in Boston.
The first apartment we rented when we moved to Valencia was €790 per month. In the La Petxina neighborhood, it was a three-bedroom, 2 bath and fully furnished flat with two terraces, about 150 square meters, and overlooked the Turia. Valencia is a great and affordable city to live in as l have often said.
Looking on the same street, a similar apartment now rents for between 1200-1500, while l see 1-2 bedroom places for €750-850. This upward trajectory is unlikely to stop as more ex-pats arrive and snap up the “bargains”. I assume the even more popular areas such as Russafa are even more expensive.
Buy to flip:
Along with the cheap to us mentality, I am noticing the trend of people wanting to buy property as an investment (rent out, Airbnb) or to flip. Unlike the states where the rules are a bit clearer, and where it is usually profitable to flip houses, the same does not hold true for Spain.
Along with cities like Barcelona and Prague, Airbnb has been under attack from locals who are being forced out due to high prices, and from the local governments who are being much stricter.
Valencia has joined the ranks and now has these tourist places licensed. Currently, l am told it is about a six-month wait to get a license (within city limits). The rules are constantly being updated. For instance, someone told me that already in place tourist licenses can no longer be transferred, and a new application must be made.
Anyone wishing to do this needs to have a thorough understanding of what is required of them (including the transmission of personal data of your guests to the police), file quarterly taxes, etc. Get yourself a great gestor or lawyer as l see a lot of “intentional omissions” by realtors. You’re on your own when the s**t hits the fan.
For those who want to flip, please remember that the mindset of the Spanish is to buy and hold (pass it on to the children) as opposed to flipping. There is a 10% tax that needs to be paid every time there is a sale which eats into your profit. It is not for the faint at heart, but l suppose it can be done with the right property.
Discrimination:
It is terrible that word has to rear its ugly head, but it happens. Renting in Spain as a foreigner, you are often asked for a larger deposit than required (six months or even a year compared to the two months) making it difficult and stressful.
This would never be asked of a Spaniard, so foreigners will often take a place even if it’s not ideal. Real estate agents admit to doing this. Higher rents can result from this practice, and it’s such a shame. I once had a potential Spanish landlord yell at the realtor because we were presented when he had specifically asked for “Spaniards only”.
My husband speaks and understands Spanish, so it was a pleasure to hear him tell the guy to stick his apartment where the sun doesn’t shine (he had relented after seeing our bank statements).
We were desperate to find a place by that time, but it felt freaking fantastic to reject him. He just sat there with a stunned look as my husband gathered up the papers. Even the realtor has a satisfied look on his face for a brief moment). The next place we saw was the above apartment which we loved.
Wrapup on the impact of expats on real estate rental prices in Valencia
The increase in the population of foreigners in Valencia has fueled a demand for properties and therefore higher prices. This trend will continue for as long as Valencia remains a desirable place to live.
My fear is that eventually, the city will become like Barcelona and Madrid, eventually making it too pricy except for the truly rich ex-pats. That would totally suck as the best part of living here is being able to mingle with people from all walks of life.
What has been your observation? Are you paying more than you should be?
I love reading your blogs! Thanks for writing.
Oh, what a terrific comment to see. Thank you so much, Phyllis. I really appreciate it :-).
On other side of the river, near the airport the prices are still reasonable (maybe because there are so few expats living here). I am paying 650€ for a three bedroom and that hasn´t changed for the past three years. I also have a really good relationship with the owners of my apartment so maybe they are being nice by not raising my rent.
Hello there! It’s true that the prices are holding steady around those parts. You can still get a bang for your buck so to speak. No way could l find our old apartment that 3 bedrooms on Angel Guimera where we paid 650 now. They have all doubled (it was still a steal then though). The rent can only go up to the max inflation rate which is pennies maybe and not worth it, especially when you have a great tenant. As you know, we looked around your area, and had it not been for the schoolyard right across from the flat, we would probably be there now :-).
Very interesting post Kemi and it’s easy to understand Valencia’s appeal. I’m also seeing the same upward trend in prices in the Portugal Algarve area as more expats arrive here from the US. It was difficult to find reasonable rentals when I first came here 6 years ago and that has only worsened. Despite that, it’s still an amazing place to live and I know you feel likewise about Valencia!
I remember how difficult it was for you to find a long-term rental then. I can only imagine how much worse it is now. The floodgates have been opened and l know the golden visa scheme has excluded the major cities. Absolute mind-boggling. You’re right though, we are both still in amazing places and glad that we have found little spots. I hope you are keeping well :-).