Spanish home sales data for July 2019 showed a return to growth after a decline in June, but the overall trend line still points south.

Spanish residential property sales figures for home sale deeds inscribed in the Land Register were up 5% countrywide in July , according to figures from the National Institute of Statistics (INE), based on source data from the Spanish Land Registrars’ Association.

Excluding VPO subsidised housing sales, there were 43,512 deeds of sale inscribed in the Land Register in July (+5% yoy), and 47,890 sales if you include VPO (+4%).

The rate of growth in Spanish home sales has been declining for about a year, and between April and June sales showed almost no growth or even turned negative, with a plunge of 8% in June. So it looks like the recovery, which started in 2014, is showing signs of running out of steam. If you add a trend line to the data from the Registrars the market deceleration is also pretty clear, as illustrated by the next chart.

Local market experts blame the April to June decline on the introduction of a complicated new mortgage law that will take some time for the market to adjust to. A positive interpretation of the return to growth in July is that the market has now done this.

These figures relate to the number of deeds of sale inscribed in the Land Register each month, which can take place weeks or even months after the sale, so these figures lag the market by a month or two.

What about the number of sales actually completed in the month? For that we turn to the Association of Spanish Notaries, who provide figures on the number of sales completions they witness each month. They report home sales in July down by 20.8% to 46,015 (including VPO) – the biggest fall in the last three years, and the third consecutive month of annualised decline, following a 20.7% fall in June, and 4.4% fall in May. This is how the volume of sales in the Spanish property market has changed in the last three years according to the data provided by the notaries.

Returning to the INE data, and looking at sales broken down by new and resale category, both types showed growth in July, with new home sales (that don’t include off-plan sales) up 10% and resales +3%. I suspect the 11% decline in new homes sales in June really was something to do with the new mortgage law and its impact on the common practise of taking over a developer’s mortgage when you buy.

Spanish home sales by region – July 2019

Turning to home sales by region, the next chart shows the year-on-year change in a selection of regions popular with foreign buyers.

After months of big declines, the Canaries had a good month with growth in home sales of 23% led by a 57% jump in sales in Las Palmas. But at the other end of the scale the Canarian province of Santa Cruz de Tenerife was still down 10%, so I can’t explain what happened in Las Palmas. The Balearics, however, continued to decline for another month.

The year-to-date regional picture is more reliable as it’s less volatile than the monthly picture. Here we see sales in the key regions popular with foreign buyers are still negative, with Malaga / Costa del Sol -7%, Alicante / Costa Blanca -9%, the Balearics -10%, and the Canaries -17%.

What might explain the recent sluggish or negative growth in Spanish home sales when the market is still nowhere near its potential, in my opinion? As I explained last month, my my take is that the Spanish property market is slowing down in the face of the following headwinds:

• Global economic uncertainty
• Political uncertainty and instability in Spain
• Spanish economic growth coming into question, with unemployment rising
• New Spanish mortgage law restricting lending
• High transaction costs biting harder as house prices are higher
• All the usual Spanish market problems like unprofessionalism and the lack of transparency continuing to deter potential buyers, especially when other factors are giving them doubts
• Brexit undermining British demand