The bust is dead, the Spanish property market’s recovery has begun! That’s how some leading daily papers like El Pais are interpreting the latest figures from the National Institute of Statistics (INE) showing the market grew ever so slightly in January. Well, I wouldn’t try to claim a vigorous recovery is underway, but there’s no denying the market appears to have found a floor, which is an improvement on the 2 years plus of monthly declines we had before.

So what happened? Well, figures for January from the INE show that, excluding social housing, there were exactly 34,000 sales in January, up 1.4% over 12 months. A year-on-year increase of 1.4% is no big deal, but it’s a much needed respite when it is the first time in 3 years that the market has actually grown, as you can see from the chart above. And it’s difficult to dismiss it as a one off, because it is clear that the market has now found a floor around 30,000 transactions/month, as the next chart shows.

But, of course, we have to keep in mind that the market in January was 56% smaller than it was in January 2007, when it stood at 77,400 sales/ month. So a year on year improvement is good news, but peak-to-trough the market is still just a shadow of its former self. Until that situation changes, there’s not much to cheer about.

If you dig into the figures you find that most of the improvement is now coming from resales, not new builds, as the next chart shows. New build sales kept the market from total annihilation last year, but I’ve been warning for months that, sooner or later, they might fall off a cliff.

And finally, the following table shows how the market evolved in January, for selected regions. A lot of the improvement came from big cities like Barcelona, Valencia, and Madrid, whereas sales continued falling in popular coastal regions like Malaga (Costa del Sol) and the Canaries. So, when it comes to holiday homes, the market in many areas is still shrinking.

Therefor a more nuanced analysis is required. Yes, the overall market has started to recovery by some measures, but there’s more to it than that. What recovery there is might turn out to be an illusion, and even if it doesn’t, some segments like holiday homes on the coast are still shrinking, even according to the Government’s Panglossian figures.

That said, I have no doubt that this year and next year will turn out to be the best time in this property cycle to buy prime real estate on the Spanish coast. This time last year looked like a disaster for world stock market and look what happened; a year on anyone who bought stocks back then would have made pots of money. It’s the same with property; when it looks like a monumental disaster it might be time to buy (but only if you understand the market and its segments.)