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Spanish home sales appear to be cooling down after a blistering year of growth in the wake of the pandemic, suggest the latest figures from the Spanish notaries’ association.

There were 69,163 homes sold and witnessed by the notaries in June, up 3.6% compared to the same time last year, the lowest level of growth since February 2021. The chart below showing the annualised change in sales every month since 2019 illustrates the downward trend.

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If you look at the 12-month rolling total (next chart), which gives you the big picture of the trend, you can clearly see the boom in sales cooling off.

In general terms sales are still the highest they have been since the boom year of 2007, but house prices are still way below the peaks of that year (next chart) and there is little evidence of a bubble. So, although sales are cooling, there is little reason to expect a crash in prices.

Why are sales cooling down? Lower growth was inevitable at some point after the high growth of the last 12 months, but the slowdown has probably been triggered now by high inflation (10.8% in July), rising interest rates, and a depressing economic outlook.

Many people see property as a good store of wealth in times of inflation, but high transaction costs, and government policy that protects tenants from inflation at the expense of landlords are strong headwinds that partly explain the lower growth.

We will have to wait a month or two more for data on foreign demand to see if foreign investors (close to 20% of the market according to the notaries) are also contributing to the slowdown.