This was a record breaking year for Kyero, and a good year for the Spanish property market in general. We wonder what will happen next.

The best thing about Spain’s dramatic property market in 2016 was the total lack of drama.

Some may point to steady price growth for reassurance, but professional market watchers won’t be looking at prices; they look at transactions. Did people buy and sell houses?

The good news is they did.

House sales in Spain rose nicely in 2016, thus far recording a 15% rise on the previous year and ten consecutive quarters of growth. If you were looking for a marker, this means the Spanish property crash officially ended in Q2 2014 – and we haven’t looked back since.

It’s all the more remarkable for the fact that this happened while Spain’s economy remained weak, with stubbornly high unemployment, restricted credit and a period of almost no government.

In any normal market, nothing much should be happening.

But Spain’s market has two unusual advantages: Firstly, it had nowhere to go but up. The 2008 crisis completely shredded the housing market, and only a zombie apocalypse could have sent it lower.

Spain’s second advantage is international appeal. With one in five property sales going to foreigners, it can endure weak local demand. British, French, German, Dutch, Belgian, Italian and Swedish buyers continue to pick up the slack.

The Brexit mystery

It was no wonder Britain’s surprise decision to leave the EU dominated the year’s conversation. With Brits topping foreign demand, this must surely be the end of the Spanish housing recovery, right?

Except it didn’t happen.

There was initial scepticism when we reported overseas searches for Spanish property via Kyero.com hit all time highs after the vote, up over 50% on 2015. It turned out we weren’t wrong, and our largest agents have reported seeing record attendance at UK investor shows. Buyers may be talking about Brexit, but they’re still looking in large numbers.

While these are good forward indicators, they admittedly don’t confirm completed sales. So what of notoriously slow official statistics? Same story: Third quarter numbers from the land registry show foreign sales close to all time highs.

The UK property crisis is Spain’s gain

It’s worth throwing in a curve ball that perhaps isn’t widely understood in Spain: The effect of UK house prices on Spanish housing.

The British housing market is currently moribund, with prices rising way beyond all the laws of affordability, and transactions at historic lows. The winners of this situation are older Brits who find themselves sitting on a vast trove of property wealth (while homeownership becomes a dying dream for their kids).

In short, the 50+ British buyers who so love Spain are sitting on huge equity piles and Brexit didn’t diminish their wealth.

This leaves very little fodder for market doom-mongers, save perhaps a Q3 slowdown in the growth of sales to UK buyers. With other nationalities on the rise, and Brits only blinking rather than quitting, the fundamentals remain healthy.

Price, price, price

There are headwinds. If we throw aside speculation over Brexit, Trump or vote rigging at Eurovision, there was only one tangible change in 2016: The value of Sterling.

The buying power of Spain’s largest group of foreign buyers was slashed in June, and Britons are currently 10% poorer.

That has already caused movement, both in buyer searches via Kyero.com, and official sales figures in Q3. British buyers are hunting for value, and Spanish destinations with high prices and a heavy proportion of UK buyers are likely to see a tougher sales environment. Evidence is already emerging that their loss is the gain of lower priced destinations (see Almeria).

In this situation, we should draw a lesson from the crash.

In 2008 it took just one year for Spanish house sales to crash by over 50%, but house prices took another four years to adjust by a similar amount. A lack of market transparency (and vendors wedded to unrealistic valuations) prolonged the pain.

This left us waiting until 2014 for the recovery to start.

We shouldn’t repeat that. If there’s some localised slow down due to Brexit, estate agents and vendors should adjust prices early. Supply and demand are unavoidable masters.

Kyero is determined to play its part, and we’ve taken big steps this year to publish more data and market commentary. We believe better information for buyers and sellers creates a more transparent market, and transparent markets are more active markets.

Ultimately, honesty sells more houses.

Places to watch in 2017

Last year we picked Alicante, the Canary Islands, Balearic Islands, Malaga and Murcia as “provinces to watch”.

We got it right on the first three and they had a good year, but we probably got it wrong on the last two. Malaga and Murcia aren’t seeing sales growth, mostly because we didn’t foresee Brexit back in December 2015.

In our defence, additional research in February highlighted the potential problem: Murcia (by proportion of sales) has heavy exposure to British buyers, while Malaga (home to the Costa del Sol) is both loved by Brits and more expensive than other destinations. Sterling’s weakness will hurt here.

For this year’s prediction, we’ve based our top picks on two key metrics. First up, we’ve taken a look at completed sales (via land registry statistics). We’ve also used search data via Kyero.com as a forward indicator of buyer sentiment. Finally we also took account of the international mix of buyers in each destination, and relative property prices.

On this basis, our top picks for 2017 are:

1. Almeria

Having seen much less development than its neighbours, Almeria retains an authentic charm that has proven popular with almost every nationality of European buyer. Q3 sales rose a massive 93% YOY, and with an average price of €129,000 it is nearly half the cost of Kyero’s national average.

Almeria is charming, well connected and very affordable. We expect an ever larger number of overseas buyers will discover it in 2017.

Trending destinations: Vera, Mojacar, Albox

2. Alicante

International investors buy more houses in Alicante each year than any other province of Spain, driving over half of all housing transactions. While this could make it susceptible to shocks, it’s strengths are hard to beat: Excellent connections, fabulous beaches, steady sales growth and prices 10-15% lower than Kyero’s national average.

Alicante is a solid performer, and very hard to bet against.

Trending destinations: Torrevieja, Alicante, La Marina

3. Tenerife

The western Canaries have had an excellent year, with average prices growing steadily at 5% to €249,000 – almost exactly in line with the national average. This is also the first destination in Kyero’s portfolio to see Italians overtake British buyers as the dominant international buyer group. Low cost flights, year round sunshine, and a penchant for building the holiday apartments that foreign buyers crave, have all made Tenerife a property hotspot.

Trending destinations: Playa de las Americas, Costa del Silencio, El Medano

4. Ibiza

We’ve allowed ourselves one speculative pick with Ibiza. Its gravity defying housing market saw average prices grow 20% in 2016 to over €1.1m, with similar growth in sales. The data is hard to follow, but that’s because Ibiza has something that can’t be boiled down to a number: Ibiza has cachet.

Trending destinations: Playa de las Americas, Costa del Silencio, El Medano

This picturesque island has become a hub for international wealth, helped in no small part by Spain’s benign tax environment for high net worth individuals. With their numbers on the rise, we expect Ibiza will continue to be the place they’ll show it off.

Trending destinations: Ibiza Town, Sant Josep de sa Talaia, Santa Eulalia del Rio