Spanish home sales declined in 2019 for the first time in six years, show the latest figures from the National Institute of Statistics (NIE).

Half a million home sales were inscribed in the Land Registry last year, some 3% less than the year before, as illustrated by the first two charts.

The biggest decline came in the resale market, but new home sales barely grew in 2019, so neither segment escaped the downturn, as you can see from the next four charts.

Despite a partial recovery in the resale market since bottoming out in 2013, the next chart shows how new home sales have barely changed in the last five years. Considering that Spain’s housing stock is relatively old and knackered, you would expect new homes sales to have done better before the recovery ran out of steam.

Spanish homes sales in 2019 by region

The decline in sales was more marked in areas of interest to foreign investors. Sales were down the most in the Canary and Balearic Islands, and down 7% in both Alicante / Costa Blanca and Malaga / Costa del Sol. The southern costa with the best results last year was the easter Costa de la Luz, in Cádiz province, with an increase of 4% for a relatively small market.

Headwinds and tailwinds in 2019

Sales were driven by the usual forces of household formation, upgrading, downsizing, investment, foreign demand, and low interest rates, with the Spanish economy still growing but slowing in 2019. But as I discussed in an article on the headwinds facing the Spanish property market at the end of 2019, tailwinds like pent up demand and economic recovery that have been driving the market forward in the last few years have been dying down, whilst headwinds have been building strength. The headwinds include:

• A new mortgage law that restricted financing for several months
• Political instability, particularly in Catalonia – one of Spain’s biggest housing markets
• Political interference in the housing market
• Consumer confidence going soft
• Oversupply in key some areas
• Higher house prices
• 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
• Spanish tax and rental laws that deter investors, especially foreign investors
• Brexit, and falling demand in foreign markets with sales down 4% last year, as illustrated in the final chart

Given these headwinds, I expect 2020 to be another year of low or negative growth in the Spanish property market.