The latest market report from the notaries show an improvement in sales and prices. However, the positive headlines aren’t the whole story, and large segments of the Spanish property market still face years of continued depression.
Following a recent report from the Property Registrars emphasising the first signs of life in Spain’s property market, data from the notaries shows that Spanish home sales rose 37 per cent in March, and 45 per cent in the first quarter of the year compared to the same period last year.
Despite the recent increase in sales, the market is still just 40 per cent of what it was in July 2007, as illustrated by the following graph:
These big increases were somewhat due to the elimination of mortgage tax relief back in 2012, distorting year-on-year sales comparisons this year.
Breaking down sales by month shows the effects of tax changes wearing off as the months went by. There were 81,042 homes sales in the first quarter, with annualised increases of 63 per cent in January, 41 per cent in February, and 38 per cent in March. Nevertheless, the underlying trend is almost certainly positive.
The notaries also revealed that house prices decreased 4.8 per cent to 1,248 €/m2 in March compared to the same month last year, but posted a quarterly gain of 1.6 per cent compared to the previous quarter. In their report they suggest that there are “signs of stability” emerging in the market for both prices and transactions.
According to their data, house prices have fallen 33.8 per cent since the peak in July 2007, which implies that all gains in Spanish house prices since 2003 have been wiped out.
Finally, the latest figures from the notaries show that residential mortgage lending volumes rose by 48 per cent in March, with the average mortgage value up 8.5 per cent to €116,673.
Looking for causes to explain the better figures, the notaries point to the impact of foreign investors on the market, and expectations of lower prices coming to an end. “Although we need to wait for more data, it looks like the figures we have point towards a change in trend or, at least, the end of the depressive cycle,” concludes the notary association.
Too early to celebrate
However, others caution that the first signs of stability doesn’t mean the Spanish housing bust is over. “We can’t celebrate yet because we are comparing with 2013, a particularly difficult year and bad in every way,” said economics professor Miguel Córdoba, quoted in the Spanish daily El Mundo. “We need a minimum of five consecutive quarters to see if the sector has improved, or is simply going through the expect correction after touching bottom.”
Córdoba says 100,000 home sales would be a normal rate of monthly transactions for a country the size of Spain, significantly higher than the 81,000 recorded in the first quarter of this year.
Even so, Córdoba concedes that the outlook is brighter. “The worst is over for the housing market and it’s no big deal if prices fall another five per cent. Everything now depends on how keen buyers and sellers are to do deals. For the moment my forecast is a period of calm.”