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The Spanish property market shrank an annualised 24 per cent to 23,242 sales in February excluding social housing, according to the latest figures from the National Institute of Statistics.
That is the lowest level of monthly sales in February since the crisis began, and 65 per cent down compared to the same month in 2007. Looking at these figures, there is no sign of recovery as far as the wider market is concerned.
Sales have fallen in February on a monthly basis in seven out of the last eight years, but never as much as the 14 per cent clocked up this february (see following chart).
Fiscal distortions are largely to blame for such dire numbers. Property sales patterns in recent years have been distorted by Government fiddling with the tax code, with a series of changes to taxes on home buyers like VAT, the Transfer Tax (ITP), and mortgage interest tax relief.
The 24 per cent annualised decline this February was mainly due to an unfavourable comparison to inflated sales in February 2013 brought about by the end of mortgage tax relief at the end of 2012. Were in not for fiscal distortions, the annualised decline in February would have been far less significant.
Next month we can expect to see a jump in sales compared to last year, once again thanks to fiscal distortions. Government tinkering with the tax code causing market distortions has done nothing but reduce investor confidence in the Spanish housing market.
The underlying trend for the market as a whole still appears to be heading down. However, anecdotal reports from prime areas of Barcelona, Madrid, and the Spanish coast suggest that sales are steady or rising, driven by foreign demand.
The following table summarise Spanish housing market sales data in recent years: