The Spanish property market, Investment opportunities in hostels & short term housing

Sammanfattning: This thesis discusses the general development of the Spanish property market over the last decade and future perspectives. A particular focus is on the city of Barcelona and the city’s local property market. The Spanish property market has since the latter half of 2007, beginning of 2008, dropped closer to 50 percent. Starting in the early years of the 21: st century, up to 2007 the Spanish construction sector in many ways drove the Spanish economy upwards. When the financial crisis hit, the economy stagnated and Spain fell into a deep recession. This resulted in an unemployment rate that as of today is running at 25 percent, weak domestic purchase power, an all-time high supply of property and a constantly declining number of property transactions. In May 2014 the country is at a junction trying to determine which way the Spanish property market is heading. Within some segments of the property market and in several areas where tourism is high there are, although weak, signs of growth in the property market prices. However in smaller regions with less tourism the property prices are still declining by up to 12 percent annually. The strong foreign demand on Spanish property contributes to a well-needed injection of foreign currency but these investments alone will not be enough to boost the Spanish economy. What we conclude is needed in order for property prices to increase in the long run is a stronger domestic purchase power, something we probably won’t see in years. Considering Barcelona, the city had the fourth most visitors of all the cities in Europe. This along with the unique culture, sports, food, and the constant stream of tourists as well as the modest property prices makes Barcelona an interesting city for property investment. In the thesis we compare investments being made in a hostel and short term housing for tourists. The result leads us to the conclusion that any property investment in Barcelona should be regarded as a risk and that you would need a steady stream of cash flow in order to hedge a continuing decline in property prices. Of the two options, short term housing for tourists would be the better of the two investments.