The latest figures from the National Institute of Statistics (INE) show that the Spanish property market grew by 16% in February compared to the same month last year, building on the trend started in January. This suggest the market has touched bottom and is starting to recovery after 2 years of declines, at least in some areas.

Not including social housing, there were 35,720 home sales in February, 21,368 of them newly built and 19,665 resales. The following graphs shows how sales have developed over the last 12 months: The first chart shows total transactions, then come sales broken down into new build and resales.

It should be noted that, although transactions increased in February for the first time in 3 years, they are still a long way down from the 67,187 clocked up in February 2007; 47% down to be precise. This may be the start of a bounce back, but from a low base.

One of the big problems facing Spain today is a monumental housing glut of 1 million newly-built homes and probably at least another million resale properties languishing on the market in search of a buyer. Transactions are going to have to recover much faster to digest this glut in any reasonable time frame. Until the glut is dealt with, construction will not recover, and downward pressure on prices will remain.

And if you look closer at the figures you find that 79% of the increase in transactions came from just 2 regions – Catalonia (43%), and Madrid (36%), so the increase in sales was basically concentrated in and around Spain’s two biggest cities. As the following table shows, the market continued to shrink or stagnate in many coastal areas popular with foreign buyers.

A last point to make is the figures might not be all they appear to be. It’s just a theory of mine but I suspect they record property transfers between developers and banks a sales, making the market seem bigger than it is. It’s worth keeping in mind when trying to understand what’s driving the ‘bounce back’ in the market.