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The latest home sales figures from the National Institute of Statistics (INE), and the Association of Spanish Notaries, both show the Spanish housing market back in positive territory in August and September, but much of that growth came from sales postponed during the lockdown, and so far this year the market is still 20% smaller than last year.
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.
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.
Why are the monthly sales figures from the notaries always almost higher than the INE’s, when you would expect them to even out over time? Perhaps some sales are never inscribed in the Land Registry, as it’s an extra cost. It’s a bit of a mystery.
Spanish home sales completed in September 2020, according to the Association of Spanish Notaries
There were 45,583 home sales completions witnessed by Spanish notaries in September, up 5.4% compared to the same month last year, following an 8.1% increase in August. The chart below shows sales completed in the last 12 months, with a big dip in the lockdown months of March, April and May, followed by a recovery as the country opened up.
The next chart shows the annualised change in sales each month, with the same decline and recovery on display, though in this chart you can also see how sales were already showing a tendency to fall before the coronavirus crisis hammered the market.
It should not be forgotten that the Spanish property market was already struggling with various headwinds before the Covid-19 pandemic smothered everything.
If you look at the 12-month rolling sales figure Y-O-Y change (next chart) you clearly see how the negative trend started two years ago, turned red in June last year, plunged in the lockdown, before stabilising and crawling back upwards between May and September.
So the figures from the notaries paint a picture of a market that was already on the slide before the coronavirus came along and strangled sales to a 70% decline in April before recovering to a 5% increase in September. However, some of that increase will be due to sales delayed from earlier in the year, which explains why year-to-date, the market was 20% smaller in the first nine months than the same period last year.
Spanish homes sales recorded in September 2020, according to the INE
Figures from the National Institute of Statistics (INE), based on sales registered by the Association of Spanish Land Registrars, show inscriptions in the Land Registry at 34,536, almost identical to September last year. In graphs, the figures tell a similar story to the ones above, just with a bit of a delay. You can view them here if you wish.
But the INE figures also come with a regional and new/resale breakdown, which gives us a bit more perspective.
New homes and resales
The figures broken down between new homes and resales show a big increase in new home sales, whilst resales were still negative, just less so. Without the increase in new home sales, sales growth in September would have been negative.
Why the big increase in new home sales? Because those homes are now built and ready for delivery, and would have been completed earlier in the year were it not for the lockdown. So the increase is deceptive. It was not a real increase, just a shift in the timing of completions.
Spanish home sales by selected region – September 2020
The regional picture looking at areas of interest to foreign buyers presents a mixed bag with some destinations like Malaga / Costa del Sol and Murcia increasing, whilst Alicante / Costa Blanca was down, as were the Balearics. I assume that new home sale completions were partly to thank for the differences, and it’s interesting to note that the biggest falls were in cities like Barcelona and Valencia, where new home sales are relatively small, certainly in Barcelona. Even Madrid was down 10%, so perhaps there is something going on in the big cities we need to keep an eye on.
Year-to-date, the regional picture is still grim in the regions most popular with foreign investors, where sales declines have been above average in Malaga, Alicante, and the Balearics. That makes sense considering that travel restrictions have been a bigger obstacle for foreign buyers than locals this year.
Covid-19 is still preventing foreigners from travelling to Spain, and may do so for months to come, all of which is bad news for the housing market on the costas and islands.
A few months ago, when looking at the Spanish home sales figures for July, I said I thought the recovery we were seeing in the numbers might turn out to be a dead cat bounce. I still stand by that. I think the increase we see in the numbers from September is mostly due to the timing of sales, not a genuine increase in demand. When the delay wears off, I think we could see a significant decline in underlying demand.
And if we have a bad economic crisis in Europe next year, which I fear is 50/50 at best, then we can expect to see lots more turbulence in 2021. What the future holds is a question I’ll tackle in a headwinds / tailwinds analysis with the end-year figures in a few months time.
But for now, it’s a relief there was a recovery in sales over the summer, because it could have been worse. But is that recovery sustainable? I doubt it.
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