Spain’s real estate market is witnessing a notable surge in demand from non-resident buyers, who are now playing an increasingly vital role. The post-pandemic era has fueled interest from international buyers, doubling the annual transaction growth rate compared to domestic purchases. Despite this upward trend, many Spanish mortgage lenders are under-serving this segment. By addressing the unique needs of non-resident buyers, Spanish lenders have a significant opportunity for growth and increased market share.
Non-resident demand on the rise
In recent years, non-residents have become a major driver of Spanish residential property transactions, accounting for 15% of total sales—a 34% increase over three years. Non-resident property transactions have grown by 85% post-pandemic, now making up about 7% of the total real estate market in Spain. In fact, between 2020 and 2023, annual growth in non-resident transactions averaged 15.8%, nearly double the 8.1% growth rate among domestic buyers.
Low mortgage attachment presents an opportunity
Despite the growth in property purchases, a relatively low percentage of non-resident transactions involve mortgages from Spanish lenders. Only 31% of non-resident purchases are mortgage-funded, compared to 66% for residents. This suggests that many non-residents are either funding purchases through their own equity or using financing options from non-Spanish lenders.
This low mortgage attachment rate highlights a substantial opportunity for Spanish lenders. By targeting non-resident buyers with mortgage products that cater to their needs, Spanish banks could increase the attachment rate from the current 31% to potentially 51%, which could drive non-resident mortgage lending to approximately €5.6 billion by 2027.
Characteristics of the Non-Resident segment
The non-resident buyer segment also presents a favorable credit and commercial profile. Key characteristics include:
- Lower loan-to-income ratio: Non-residents have an average loan-to-income (LTI) ratio of 1.68, compared to 2.7 for residents.
- Stronger credit profile: Non-residents tend to make larger deposits and have a better payment history, indicating lower risk.
- Higher loan size: The average loan amount for non-residents is 31% higher than that of residents, translating to greater profitability for lenders.
- Diverse buyer base: While UK and German buyers dominate, there is strong growth from American buyers, who now account for almost 10% of total non-resident purchases.
These attributes indicate a strong, resilient, and profitable customer segment that is less impacted by interest rate fluctuations than the domestic market.
Challenges and solutions for Spanish lenders
Spanish lenders face several challenges in capitalizing on the non-resident mortgage market. The issue is less about product availability and more about ensuring that mortgage products are accessible, relevant, and tailored to the specific needs of international buyers. The complexity of serving this segment can deter lenders, but overcoming these barriers is essential to capturing a fair share of the market.
This is where technology-driven solutions, like those offered by CreditLogic, come into play. By leveraging advanced digital origination solutions, lenders can streamline processes, reduce friction, and improve the overall customer experience. These innovations allow banks to better serve non-resident clients, mitigate risk, and secure a competitive edge.
Future outlook: a growth market for lenders
The non-resident mortgage segment in Spain is expected to grow robustly. If the current growth rate of 15% persists, and with an increased mortgage attachment rate, non-resident lending could represent over 8% of Spain’s total mortgage lending by 2027. Spanish lenders who adopt tailored, tech-enabled strategies stand to benefit from this expanding market, creating a sustainable path to growth and diversification.
As the demand from non-residents continues to grow, Spanish lenders have an opportunity to build a solid foothold in this lucrative market. With the right approach and technology, they can enhance their offerings and establish themselves as leaders in serving international property buyers in Spain.
