Expats Key to Spain's Housing Recovery

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While activity is still far below peak levels, expats are playing an increasingly important role in the struggling Spanish housing market.

Foreign buyers accounted for 12 percent of total home sales in Spain in 2012, which is very close to pre-crash ratios, according to data compiled by Mark Stucklin of Spanish Property Insight. The number of foreign buyers in Spain grew by 26 percent in 2012; the annual volume is up 64 percent from the bottom of the market in 2009, Mr. Stucklin reports.

The 44,087 homes sold to foreigners in 2012 is still far below the peak year of 2006, when more than 123,582 homes in Spain were sold to foreign buyers. But the number of foreign buyers has been steadily rising since 2009, when the market bottomed out at 26,912 sales to foreigners, according to data from the Department of Housing.

In contrast, sales to Spanish citizens slid from 455,111 in 2010 to 314,654 in 2012, according to research from Spanish Property Insight. The number of Spanish buyers grew by a slim 2 percent in 2012, despite tax credit incentives.

Although relatively small, the increase in foreign activity--led by Northern European "climate migrants," as opposed to economic migrants--will play a crucial role in any recovery, Mr. Stucklin argues.

"It's always a minority group that starts the turnaround in every market (the herd come later)," Mr. Stucklin writes. "As cash buyers from stronger economies, expats will be the ones who sow the seeds of the recovery in Spain, if they are allowed to."

The data is also tinged with irony, in the wake of new measures introduced by the Spanish government, which require all residents, including expats, to declare assets abroad, Mr. Stuckin notes.

"It stands to reason this new law will discourage expats from retiring to Spain, or at least doing so legally and declaring their residency," Mr. Stucklin writes. "How many expats will now move to Spain and put their life's savings within the grasp of the Spanish tax authorities?"