Spanish housing market showing signs of another decline

ine-chart-sales-08-13

The Spanish housing market shrank 15pc according to sales inscribed in the property register in August, and published by the National Institute of Statistics (INE).

These figures report home sales that took place several months earlier, around June. It takes a couple of months for sales to be inscribed in the property register and published by the INE.

Excluding social housing there were 21,317 home sales inscribed in the property register in August, down 15pc in a year and 9pc in a month.

Rising transaction costs

High and rising transaction costs are one big reason why the Spanish property market is still shrinking seven years after the crisis started. Other than in the Canaries, it now costs between 10pc and 15pc to buy a home in Spain, which is a major obstacle for home sales.

Catalonia and Valencia both raised the tax on buying homes to 10pc in August, which I expect will have a negative impact on sales in those regions, both of which are big and important markets.

A decline of 25pc in the sale of new homes was the main culprit for the lurch down in sales volumes inscribed in August, with resales down just 6pc. The following chart shows how sales brake down between new build (orange) and resales (red).

spanish home sales by type

By region, the biggest increase took place in Navarre (+20pc) and the biggest decline was in Cantabria (-39pc).

spanish home sales by region

The following table summarise home sales figures published by the INE for the last seven years, since the bubble burst.

spanish home sales by year

Comments

comments

4 thoughts on “Spanish housing market showing signs of another decline”

  1. Will Needham

    I agree with Mark’s analysis, and indeed that of many other commentators, the downward trend has been exacerbated by an increase in property transfer tax in some regions. It’s precisely the opposite of what is required.

    The vain attempt to increase tax revenues by increasing already excessively high property transfer taxes will have damaging and unintended consequences for other parts of the economy.

    An optimum ITP rate should be around 0 – 3% , 10% is just suicidal… and demonstrates an economic incompetence by regional governments. These high rates will prolong the crisis in Spain.

  2. Will Needham

    I agree with Mark’s analysis, and indeed that of many other commentators, the downward trend has been exacerbated by an increase in property transfer tax in some regions. It’s precisely the opposite of what is required.

    The vain attempt to increase tax revenues by increasing already excessively high property transfer taxes will have damaging and unintended consequences for other parts of the economy.

    An optimum ITP rate should be around 0 – 3% , 10% is just suicidal… and demonstrates an economic incompetence by regional governments. These high rates will prolong the crisis in Spain.

  3. Paul

    Will you are dead right what you are saying, it is something in the Spanish mentality. Some years ago I witnessed what some Spanish vendors did when there property had not sold for a while they changed estate agents and promptly bumped up the price of their property. Absolutely mental !!!! this strange attitude obviously pervades the corridors of regional power in Spain to this day.

  4. Filip

    Taxes are always a pain, but lets put this in perspective,
    It seems mainly foreigners ar buying real estate. That means the taxes actually bring in money from abroad and makes sure foreign investors who have put their eyes on the various bargains dont come in for a free ride only.
    Also, 10 % seems to be a standard rate in many more countries around the world. Lets not forget that even the IMF has suggested to governments to look at extra income from taxing real estate.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.