The market for new homes in Spain appears to be drying up, so what lies behind this news? asks a recent article at the Spanish property portal Idealista.com.
The Spanish new home market is at all-time lows. In November 2014 just 7,767 new homes were sold, down 21 per cent in a year, the lowest number on record in the National Institute of Statistics (INE in Spanish). Meanwhile, the market for what the INE classify as “second hand” homes is growing strongly. Home sales in November were up an annualised 45 per cent, according to the INE (see chart above).
Looking at sales going back to 2007, the following chart illustrates how sales started to diverge at the beginning of 2014.
The first thing to know is that all properties that are more than two years old are classified as “second hand” in the INE’s figures, explains Idealista. Most of the never-previously-sold properties that were built in the boom are now more than two years old, which means they are classified as “second hand” even if they have never been bought or occupied.
In addition, banks now have huge numbers of new builds on their balance sheets. When the banks first repossessed these properties from developers, they were considered “new” sales. However, now they are offered for sale again by the banks, they are considered “second hand”, regardless of when they were built, and despite never having been occupied.
So, in a way, the decline in “new home” sales is deceptive. The stock of never-previously-occupied homes isn’t declining that fast, just the way these homes are classified by the official number-crunchers.
Weighing Down On The Market
The Idealista article points out that the number of unsold never-previously-occupied properties in Spain is still shocking, and that supply exceeds demand, which weighs down on the market.
Up to December 2013, the stock of new properties in Spain fell by 3.3 per cent to reach 563,908 units, according to the Spanish Ministry of Development (Fomento). Since 2009, the year when stocks started to decline, the excess inventory has decreased by just 13 per cent.
Most of the unsold properties are in Andalusia whose 91,212 properties equal 16.17 per cent of the total stock.