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Housing Market “Vital Signs” Improve in First Quarter

Spanish  home sales by quarter,
Spanish home sales by quarter, total (blue), new (red) and resale (yellow)

The latest report from the Spanish Property Registrars, based on properties inscribed in the Registry during the first three months of the year, provides fresh evidence that the country’s grinding property slump is running out of steam.

Home sales rose 14% in the first three months of the year compared to the last three months of 2014, prompting the Registrars to talk of a “change of trend.” There were 83,022 sales in the period, (37,731 new build and 45,291 resales), and 311,400 over the last 12 months.

However, on an annualised basis, and rolling 12-month basis, home sales were still down, by 8.22% in the latter case, driven by a slump of 18% in new build sales over the last 12 months. So the quarterly rise needs to be understood in a wider context of falling annualised sales, which are still at a record low.

“After six consecutive years of house price declines, especially intense in certain periods, everything points towards the end of this scenario drawing to a close, giving way, at the least, to price stability,” says the Registrars’ report.

Most sales were in Andalusia (16,336), Madrid (13,026) and Catalonia (12,190), and the Valencian Community (11,996).

Spanish home sales Q1 2014 broken down by region
Spanish home sales Q1 2014 broken down by region

Sales of new homes were 45% of the market and resales were 55%, and the proportion of new sales is expected to continue shrinking.

“The almost total lack of new housing starts in recent years means the only option for new homes are those built during the boom and still for sale. A large share of them are in the hands of the financial institutions, being sold actively with price reductions, guaranteed financing….As this stock reduces, the relative weight of new home sales will decline to ever smaller quotas,” say the Registrars. To put it another way, new home sales will collapse as the pipeline of new homes runs dry.

Price Declines Calm Down

Prices also showed signs of improvement after years of accelerating declines. Average national house prices rose 0.84% in a quarter, and fell 1.7 per cent over 12 months – a big improvement on the double-digit annualised declines the same time last year.

Spanish Registrars' House Price Index
Registrars’ House Price Index

And as this following chart shows, annualised price declines appear to be heading for positive territory after at least six years in the red.

Annualised Spanish house price changes
Annualised house price changes

“This is the first time in eight years that sales and prices have improved together. This situation hasn’t happened since the first quarter of 2006,” explains the report.

Foreign Demand Bolsters Market

Foreigners buying property in Spain once again represented more than 12% of the market, though their market share fell slightly to 12.23% in the first quarter, down from 12.85% in the previous quarter.

Foreign buyers as percentage of overall spanish property market
Foreign buyers as percentage of overall market

“Many nationalities now see the Spanish property market as a very interesting option, and a good moment to buy a home, especially focused on second residencies in tourist destinations,” explain the Registrars.

British buyers are still number one in terms of volume, with around 17% of key foreign markets, followed by the French, Russians, Germans, Belgians, Swedes, Italians, and Norwegians.

Spanish property sales by foreign markets q1 2014

Spanish property foreign buyers market share q1 2014

Foreign demand for property in Spain is one of the main reasons why the housing market’s vital signs are finally starting to show signs of life.

SPI Member Comments

2 thoughts on “Housing Market “Vital Signs” Improve in First Quarter

  • Andrew Davies says:

    For any thinking about buying in Spain. I would say this is the time. Before the herd changes direction and this informative website starts talking about another bubble in the Spanish in housing market. As is currently happening in the South East of England.

  • Mark Stücklin says:

    Andrew I think you are right, although the high transaction costs will make many people think twice, and rightly so. Even so, the wider market will be depressed for years to come. There will be some heat in local segments like Marbella, Ibiza and Barcelona, but I doubt we will reach bubble territory for a few years or more.

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