Spanish property market crash accelerates, with transactions down 31% in May

Spanish property sales fell by 31% to a total of 107,947 transactions in May compared to the same time a year ago, according to a press release from Spain’s Institute of National Statistics (INE). The market has shrunk every month this year for which figures are available (January -27%, February -24%, March -38%, and April – 7%), highlighting the severity of Spain’s ongoing property market crash.

Looking just at the number of residential dwellings sold in urban areas during May, the market shrank even more, by 34% to 50,161, compared to May last year. Taking accumulated figures for the first four months of the year, the urban residential market has contracted by 27% compared to the same period last year.

Sales of resale properties appear to be suffering the most, down 44% to 25,280, compared to the 21% fall (to 24,890) in the number of newly built properties sold by developers. This figure is misleading, however, as the INE’s figures are based on property transactions inscribed in Spain’s property register, not new sales achieved by developers, which are down by between 40% and 60%.

By autonomous region, the market deteriorated the most in Catalonia, where it shrank by 52% from last year, followed by La Rioja (-45%), The Balearics (-43%), Navarra (-42%), and The Valencian Region (-41%). The only regions to experience any growth were Extremadura (+8%), and Cantabria (+36%).

In Catalonia, the province hardest hit was Girona (Gerona), where sales in May fell by 57% to 832 compared to 1,955 last year. Girona province is home to the Costa Brava, where there is a high proportion of holiday homes, sales of which are suffering the most in the present market. But even in Barcelona the market shrank by 51%.

The market for rural property fared a little better, falling by a national average of 26% compared to last year.

Compared to April, the Spanish property market shrank on a monthly basis by 10% (10.7% for resales, and 9.5% for newly built).

The INE also revealed that mortgage borrowing crashed by 36% in May compared to last year, with the average mortgage value falling to 140,861 Euros. As the credit crunch rolls on, Spanish banks are being forced to rein in their lending, which is one of the main drivers of Spain’s property market crash. Other drivers include a rapidly deteriorating economy, falling consumer confidence, rising unemployment and inflation, and a monumental property glut.

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