After five consecutive months of annualised sales increases it’s clear the Spanish property market is starting to recover in volume terms, as more buyers enter the market.

Markets are all about transactions and prices, which determine volume and value. Increasing transactions are a sign of confidence that improve liquidity and reduce risk. When buyers outnumber sellers prices start to rise. So today’s news that the Spanish property market grew by an annualised 10 per cent in July, and by 9 per cent on a quarterly basis, is welcome, though it doesn’t mean the Spanish property crisis is over.

Figures from Spain’s National Institute of Statistics (INE), released today, show there were 25,720 residential property sales (excluding social housing) inscribed in the Property Register in July, based on sales completed in preceding months.

The graph above illustrates monthly home sales based on the Institute’s figures going back to 2007, the year sales started heading down after the crazy escalation of the boom. It’s now crystal clear that the Spanish property market has established a floor in transaction terms, suggesting sales are unlikely to fall any further. If anything they will continue growing, as they have for the last five month. The question is how sickly or robust will the sales recovery turn out to be?

It’s positive news that the INE’s home sales figures for July were the highest for four years, and only 55 per cent below the level of 2007. I say “only” because as recently as January of this year sales were down 65 per cent compared to 2007. Though the INE doesn’t break down monthly sales figures by nationality, we know from other sources that foreign buyers have been driving the sales increase, suggesting there is plenty of scope for further increases when local demand picks up with falling unemployment and easier mortgage lending.

Looking at sales by previous ownership, the trend towards resales continues, with new sales down 8.3 per cent in a year, and resales up 26.8 per cent. Expect the trend to continue as the pipeline of new homes that people actually want to buy dries up over the next year or so. Housing starts have collapsed by 95 per cent since the boom, and the Spanish home building industry has all but disappeared. It might not be a bad time to invest off-plan, if you can find anything to buy off-plan that is.

The label “new homes” is starting to lose its meaning in Spain, as most of the “new” homes currently languishing on the market were built years ago so are now far from new. Built during a boom when standards fell and prices rose these homes have been collecting dust and depreciating for years. ‘Never-sold’ would be a better label than new.

Looking at sales by region, some of the biggest increases took place in the provinces of the interior, for example Cáceres (Extremadura) up 87 per cent, albeit from a low base. Sales in some coastal areas like Málaga’s Costa del Sol, where foreigners tend to buy, were above the national average, but overall the regional composition of the July figures suggest that demand is also growing in the local market, which is good news.

For the time being, and likely for some time to come, sellers outnumber buyers in the Spanish property market, so price pressures will remain muted at a national level, and it’s difficult to believe the INE’s latest house price index showing an 0.8 per cent increase over 12 months. It doesn’t help that the biggest vendors of all are Spanish banks, who are probably the worst property sales organisations on the planet, and not much better at banking.

On the other hand, Spanish estate agents report that demand pressures are already starting to build in prime segments of Barcelona, Madrid, and the best resort towns of the coast, so investors and vendors will learn more looking at segments than national averages. Nevertheless, today’s figures confirm that overall sales are now stable, if not growing slightly. After almost eight years of consecutive declines in home sales, that is welcome news for Spain.

And finally, a table summarising home sales figures for the last seven years: