As expected, the Spanish property market took a nosedive in March after tax breaks for buyers expired, and fell below 20,000 sales for only the second time since the crisis began.
There were 19,318 home sales in March (excluding social housing), the lowest level since the onset of the Spanish property crash, according to the latest figures from the National Institute of Statistics (INE).
After a deceptively promising start to the year, sales plunged 12pc in March, as illustrated by the graph below. Sales were 37pc down over one month, and 72pc down compared to March 2007.
Nobody was really surprised by the plunge, as it was well understood that higher sales in January and February were the result of sales being brought forward by tax breaks expiring at the end of 2012 (the sales took place at the end of 2012, but were registered in Jan/Feb).
As I said when I reported increasing Spanish home sales last month, the good news wasn’t going to last.
However, I didn’t expect the fall in sales to be quite so heavy. I got it wrong when I predicted last month that sales would never fall below 20,000/month this year. My wonky forecast was wrong as quickly as it could be.
Delving into the figures, new home sales were hit the hardest – down 44pc in a month, compared to a 31pc decline for resales. New home sales have been hammered by VAT rising from 4pc to 10pc, on top of the termination of mortgage interest relief for buyers.
Now that distortions from fiscal changes have passed through the system we can expect sales to recover somewhat next month. Taking the first quarter as a whole, the market was still 10pc up on last year.
In value terms (transactions x average price), the Spanish property market in March was down more than 80pc compared to 2007. The Spanish real estate business, which so many people used to live off, is just a fraction of its former self.
Against this background the Spanish Government is unhelpfully introducing measures to discourage foreign investors and make it more expensive to buy and refurbish property in Spain.
More bad news to come say Notaries
Home sales fell 31pc in March, and by 25pc in Q1, whilst prices fell 10pc in a year, according to figures just published by the Notaries association. Sales witnessed by Notaries get registered and published by the INE a few months later, so we can expect falling sales figures published by the INE for at least the next couple of months.
To wrap up, as usual, a table summarising the latest home sale figures from the INE.