The number of new build sales inscribed in the Spanish property register rose by 12% in April compared to a year ago, reversing a trend of 3 months of declines. Compared to March, the number of new build sales rose by 22%.
These figures, just released by Spain’s National Institute of Statistics (INE), are based on the number of sales recorded by Spain’s property register. Property deeds are inscribed in the register after sales have been notarised and taxes paid.
Taking into account resale properties, the overall Spanish property market shrank by 7% in April, down to 50,815 transactions from 54,838 the previous year. A fall of 20% in the number of resale properties dragged the market down despite the increase in recorded sales of newly built properties.
On a cumulative basis, property transactions inscribed in the register fell 25% in the first 4 months of the year, with newly built properties down 11.6%, and resale properties down 34.8%.
On the face of it, the April increase in the number of newly built property sales recorded in the property register suggests a surprise improvement in the market for newly built homes. But it would be premature to assume that the new development market has turned the corner for several reasons.
Firstly, for developers selling off plan or under construction, inscription in the property register is the final stage of a sales process that can last 2 years or more, and that begins when clients sign a private sale agreement. As a result, the figures from the property register usually reflect sales ‘booked’ by developers in a previous period. What matters as much for developers is the pipeline of new clients signing private sales agreements today. According to most reports, and the developers themselves, the pipeline of new sales is down by 60% or more, which will take time to show up in the property registry’s figures.
Secondly, the fact that Easter fell in April last year reduced the number of sales inscribed in the property register that month, thus distorting any comparison with April this year.
Nevertheless, the increase will be a welcome spec of good news for Spain’s home builders, as it suggests that buyers are still able to get mortgages, and that there might still be some life left in the market for newly built property.
The news from the resale market, on the other hand, remains gloomy. April sales fell by 20.4% compared to last year, though it should be pointed out that, compared to March, sales were up 20.3%, to some degree due to the Easter effect.
On closer inspection, the April figures reveal that much of the market’s decline was driven by falls in a few key areas such as Catalonia, where recorded sales fell by 33% in total, with new build down 32% and resales down 34%. The Balearics were also down, by 28%, and Madrid down by 17%. Surprisingly the Valencian Community and Andalucia, which rely heavily on the sales of holiday homes, were only down 1.7% and 0.9% respectively. Murcia was up 12% (new build up 33%, resales down 9%), Extremadura was up 12%, Galicia up 7%, Cantabria up 13%, and Castilla-La Mancha up a whopping 46% (new build up 67%, resale up 31%).
Mortgage lending falls, but less than in March
The INE has also released figures on mortgage lending activity in April, revealing that the average value of new mortgages in April fell by 4.8% to 141,422 Euros, whilst the number of mortgages sold fell 9.4% to 86,549. Compared to March, when new mortgage values fell by 40%, April’s 4.8% decline doesn’t look so bad.