The Spanish property market was already fragile with weak demand before the Coronavirus storm hit Spain harder than almost any other country in Europe, reveal the latest figures.
Spanish home sales figures come from two official sources: 1) The Association of Spanish Notaries based on sales witnessed by them in the month, and 2) The Institute of National Statistics (INE) based on sales inscribed in the Land Register by the Association of Spanish Land Registrars. Click here for a popup explaining the difference between the two sources.
Understanding the official data sources for Spanish home sales figures
The sales figures from the notaries are more timely, as they tell us how many transactions are actually completed with exchange of deeds and payment in the month, but they don’t give much detail beyond the number of sales, and they tend to be revised significantly for months afterwards, so you can’t be sure of the numbers when first published.
Sales figures from the INE offer more detail like a breakdown of sales by region, but lag the market by a a period of months because it takes time to go through the bureaucratic process of inscribing a sales deed in the Spanish Land Register. So the sales figures from the INE tell us almost nothing about the number of sales in the month they refer to, and only tell us how many sales previously completed were inscribed that month.
So when the numbers from the notaries go up or down, you can expect a similar change to show up in the INE’s figures a few months later.
Neither source tell us anything about the number of sales agreed between buyers and sellers in private contracts like the arras contract, or about off-plan sales agreements, all of which will take months, or even a year or more in the case of off-plan sales, to show up in the official figures.
So what did the official Spanish home sales figures published for January 2020 tell us about the market?
Spanish home sales according to the notaries – January 2020
There were 39,366 home sales completed before notaries in January, a year-on-year decline of 5.9% say the notaries (-6.2% according to my records using their revised figures – see chart above), for all home sales, including subsidised housing, known as VPO. Which means the market started the year in a fragile state, with weak demand reflecting a change in the trend after years of growth that came to an end around February 2019. Since then sales have been positive in only five of the last twelve months.
And if you look at the 12-month rolling average year-on-year, to get a better sense of the underlying trend, the market contraction is clear to see. The sales figures from the notaries show the Spanish property market cooling down and contracting after a recovery and expansion that lasted five years, from 2014 to 2019.
According to the notaries, house prices rose by 1.5% in January to a national average of 1,474€/m2, with apartments up 2.9% to 1,685€.
Spanish home sales according to the INE – January 2020
Figures from the INE, based on sales registered by the Association of Spanish Land Registrars, show inscriptions in the Land Registry unchanged at 42,876, including subsidised housing, known as VPO. Excluding VPO the free market was down 2% to 46,927. Sales inscriptions have been almost unchanged for three years in a row around 42,500, as you can see from the next chart.
But once again, if you look at the year-on-year change in the 12-month rolling average, you can clearly see the downward trend (next chart).
It turns out that the 2% decline in January was driven by an 8% decline in new home sales, whilst resales were unchanged.
Spanish home sales by region – January 2020
A picture of sales in selected regions of interest to foreign investors – namely the provinces and regions on the coast plus Madrid and the islands – reveals that the Canary Islands enjoyed a dramatic boost in sales after many months of declines, and Almeria and Murcia also enjoyed strong sales growth, but most regions were negative, in particular Barcelona and Alicante, both down 11%.
Spanish home sales conclusion – January 2020
Both sets of figures show the market started the year with fragile demand, whilst the numbers from the notaries show the market in actual decline, though revised figures in months to come might overturn that conclusion, so it’s too early to say for sure.
But now it doesn’t really matter what happened in January because the Coronavirus pandemic has turned everything upside down. All previous trends will be massively disrupted for months to come. But it’s worth noting that the Spanish housing market was already fragile in the face of a growing number of headwinds, leaving it more at risk of a slump in the face of an external shock like the Coronavirus.