Spanish home sales data for August 2019 reveal a market on the slide with transactions on the decline in almost all areas of interest to foreign investors, though there are reasons to think the setback might not last.

Whichever figures you look at, the number of home sales recorded in August were lower than the same month last year.

There are two main sources of home sales figures in Spain; on the one hand, the National Institute of Statistics (INE) based on source data from the Association of Spanish Land Registrars, and on the other, the Spanish Notaries’ Association.

The data from the INE is based on the number of deeds of sale inscribed in the Land Register each month. Inscription can take place weeks or even months after the sale, so these figures lag the market by a month or two.

The data from the notaries is based on the number of sales completions they witness each month. Their figures are more timely but subject to significant revision in the months that follow.

Spanish home sales in August 2019 according to the notaries

According to the notaries there were 30,351 Spanish home sales in August, a decline of 4.5% compared to the same time last year.

Home sales have declined for four consecutive months, and in five of the last six months, according to the notaries, as illustrated in the chart below.

You have to go back to the 2013 when the market was just starting to turn around after the real estate crash to find declines as big as this. And this is the first time since 2012 that we see four consecutive months of declines in sales. There’s little reason to fear another crash today because the circumstances are so different (for example the total lack of a credit bubble and new construction still down 90% compared to what it was), but it is certainly starting to look as if the wind has gone out of the market’s sails, at least for now. That has implications for buyers, vendors, and property professionals, who might want to adjust their expectations accordingly.

Spanish home sales recorded in August 2019 according to data from the INE

The number of Spanish home sales inscribed in Spain’s Land Register in August for sales completed in the proceedings months was 32,329 excluding VPO subsidised housing sales, down 20% in a year (-21% if you include VPO sales). That’s the second decline in the last three months and the trend is clearly down.

As these figures lag the market by a few months, this big decline was to be expected given the 21% decline we saw in the notaries’ figures in June. With the notaries’ figures in hand, we can expect another double digit decline in the INE’s figures next month.

The INE figures also give us a breakdown of sales by type of property (new / resale) and by region.

New and resale Spanish property transactions recorded in August 2019

There were 6,426 new sales and 28,945 resales recorded in the month, both including VPO, and both down 21%. Although the new figures don’t include off-plan sales they don’t bode well for developers if they point towards a trend.

Spanish home sales in August 2019 by region

The regional picture was one of widespread declines in all areas of most interest to foreign buyers, with the Canary Islands taking the biggest hit (-40%), and even the perenially popular Costa del Sol (Málaga province) down 30%. Only the small market of Almeria managed to clock up a positive number of just 3%.

Year to date the picture is less negative with some big markets like Catalonia still up on last year, but the key markets of Alicante (Costa Blanca), Malaga (Costa del Sol), and the Balearic and Canary islands are all smaller in the first eight months of this year than they were in 2018.

What’s going on?

Experts blame a new Spanish mortgage law introduced in June for disrupting sales before and after that, which can clearly be seen in the notaries’ figures and is now showing up in the INE figures. From the notaries figures it looks like the declines are getting smaller (June -21%, July -17%, August -4%) and we may even see a return to growth in September if the trend continues. But experts also warn that the current political instability in Spain, with elections due in November, and the Catalan independence drive hanging over them, is undermining the confidence of potential buyers, who could be forgiven for adopting a wait-and-see approach.To which I would add foreign demand appears to be cooling fast thanks to high transactions costs, unattractive tax laws, and the lack of transparency and professionalism in the Spanish property market all taking their toll on foreign demand now that prices are not so attractive. I don’t expect another crash but it looks like headwinds are playing a bigger role in the market than before, and could set the agenda for the next few months. That said, all experts quoted in the Spanish press forecast a return to moderate growth in sales during the last quarter of the year.