Spanish property market slumps after tax breaks expire

Spanish home sale march 2013

As expected, the Spanish property market took a nosedive in March after tax breaks for buyers expired, and fell below 20,000 sales for only the second time since the crisis began.

There were 19,318 home sales in March (excluding social housing), the lowest level since the onset of the Spanish property crash, according to the latest figures from the National Institute of Statistics (INE).

After a deceptively promising start to the year, sales plunged 12pc in March, as illustrated by the graph below. Sales were 37pc down over one month, and 72pc down compared to March 2007.

Spanish home sale march 2013

Nobody was really surprised by the plunge, as it was well understood that higher sales in January and February were the result of sales being brought forward by tax breaks expiring at the end of 2012 (the sales took place at the end of 2012, but were registered in Jan/Feb).

As I said when I reported increasing Spanish home sales last month, the good news wasn’t going to last.

However, I didn’t expect the fall in sales to be quite so heavy. I got it wrong when I predicted last month that sales would never fall below 20,000/month this year. My wonky forecast was wrong as quickly as it could be.

Delving into the figures, new home sales were hit the hardest – down 44pc in a month, compared to a 31pc decline for resales. New home sales have been hammered by VAT rising from 4pc to 10pc, on top of the termination of mortgage interest relief for buyers.

Now that distortions from fiscal changes have passed through the system we can expect sales to recover somewhat next month. Taking the first quarter as a whole, the market was still 10pc up on last year.

In value terms (transactions x average price), the Spanish property market in March was down more than 80pc compared to 2007. The Spanish real estate business, which so many people used to live off, is just a fraction of its former self.

Against this background the Spanish Government is unhelpfully introducing measures to discourage foreign investors and make it more expensive to buy and refurbish property in Spain.

More bad news to come say Notaries

Home sales fell 31pc in March, and by 25pc in Q1, whilst prices fell 10pc in a year, according to figures just published by the Notaries association. Sales witnessed by Notaries get registered and published by the INE a few months later, so we can expect falling sales figures published by the INE for at least the next couple of months.

To wrap up, as usual, a table summarising the latest home sale figures from the INE.

Spanish home sale march 2013

Comments

comments

3 thoughts on “Spanish property market slumps after tax breaks expire”

  1. Juan

    It seems to me and many others that the Spanish government have a death wish as regards to their “Golden Goose” the property market! I do not suffer from the problem many foreign residents do ie grasping at straws in the hope that they will herald an improvement in the property market. Your comment “we can expect sales to recover somewhat next month” is based on the flame optimism which sad to say the Spanish authorities are continually dousing with cold water. Here as just some of the reasons that the property market will not improve in the foreseeable future.
    1. 3.5 million properties waiting to be sold.
    2. Due to defaults this figure is not decreasing.
    3. The limited buyers from Europe are looking elsewhere due to the Spanish attitude.
    4. The knowledge that soon the banks because of pressure will have to start dumping their toxic assets.
    5. Lau law is still in force.
    6. The new declaration of asset law.
    7. The proposed restrictions on letting property.
    8. The continual attack by the local authorities on foreign resident properties for extra tax or projects invented to raise cash.
    9. The retrospective alteration of laws relating to permission on building and occupation.
    10. And because of this, there are a vast numbers of foreign property owners just waiting for a slight upturn in the market so that they can dump their property and return to their safe homeland! This will cause a double dip in prices.
    And many more.

    Regards

    Juan

    1. Profile photo of Mark Stucklin Post Author

      Juan,

      Foreigners are buying in increasing numbers, as you can see for yourself from this analysis of the latest registry figures:
      http://www.spanishpropertyinsight.com/2013/05/06/foreign-property-buyers-spanish-house-market-2012/

      Whether or not they will continue to do so given the obstacles introduced by the Government is a far from certain. I frequently said I worry that foreign demand – the only demand with any vim at the moment – will be killed off by the crazed new measures introduced by this Government.

      Local demand is almost certain to recover somewhat next month, because it would be difficult to go any lower (though I could be wrong). However, that is not to say I expect any recovery in the housing market. Far from it: I expect us to bump along the bottom this year.

  2. Richard C

    Looking at the Kyero site for average 2013 prices for freehold properties in Barcelona region and even more in The Basque Country it certainly does not seem that cheap to me in the UK…unless those two regions are compared to London which is likewise completely divorced from the rest of the UK.

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