Partly due to Government tinkering with the tax code, the Spanish property market grew by an annualised 26 per cent in March, according to the latest figures from the National Institute of Statistics (INE). Coastal areas, where foreigners tend to buy holiday and retirement homes, posted particularly strong gains.
Resales were up 36 per cent, and new sales up 7 per cent, reflecting the collapse in new construction. The pipeline of new homes that people actually want to buy is running dry.
This dramatic rise in Spanish home sales can partly be explained by tax changes, which have been playing havoc with Spain’s property market statistics in recent months.
The elimination of tax breaks for mortgage borrowers at the end of 2012 artificially inflated then depressed sales statistics both at the time, and now that year-on-year numbers are out. Which explains why we had contradictory news in recent months with Spanish home sales surging and Spanish home sales plunging in February. The impact of fiscal distortions on Spanish property sales should now start to wear off.
Fiscal distortions apart, the Spanish property market increasingly looks like it has bottomed out between 20,000 and 25,000 homes sales a month (excluding social housing). With 24,377 sales in March the market was up 5 per cent on a monthly basis, and the highest for two years, up 10 per cent on March 2012. So the underlying trend looks like a depressed market finally showing signs of stability, though no recovery outside of coastal areas and big cities.
Costa del Sales
The regional story in the latest numbers clearly shows coastal regions where foreigners buy holiday and retirement homes doing much better than the national average.
Always bearing in mind that fiscal distortions played some part, sales increased an annualised 113% in Malaga, home to the Costa del Sol, and 109% in Cadiz, home to the Costa de la Luz. Sales increases were also way above the national average in the Balearics, Girona (Costa Brava) and Barcelona. Growing foreign demand is part of the explanation for these huge increases on the coast.