Home sales crashed the most and recovered the best in the Balearics

After days hunched over a computer wrestling with data from public sources that never make user-friendliness a priority I’ve created a spreadsheet combining all the sales data I can find, and created an index that shows how big the crash was in different regions of interest to foreign investors, and how strong the subsequent recovery.

The Spanish real estate boom / bubble started deflating in 2007, when there were 775,300 homes sales according to the INE* (National Institute of Statistics) and continued falling until 2013, when the market bottomed out with 312,593 sales that year, a peak to trough decline of 60 pc. Or put another way, sales in 2007 were 148 pc higher than in 2013. It was a dramatic crash from which Spain has still not fully recovered. The bad bank (SAREB) set up to deal with the toxic real estate assets is still 30€b in the red, which the Spanish tax payer (or someone else) will one day have to write off, but that’s another story.

The chart above shows an index of residential property sales transactions from 2007 to 2022 using 2013 as the base year (100), with the national average highlighted. You can see how it collapsed from 248 (148 pc above 2013 in 2007) to 100 in 2013, and then started slowly recovering, a bout with Covid in 2020 notwithstanding. By 2022 sales country-wide were 108 pc above 2013, so just over double. Most of the regions of interest to foreign investors (90 pc of whom buy in just seven of Spain’s seventeen autonomous regions) followed a similar path to the national average, but some crashed deeper and recovered better than others. And curiously, the areas that crashed the most also recovered the best. Which were they?

Balearics wins the regional prize

The region where sales fell the most and recovered the best was the Balearic archipelago (Majorca, Menorca, Ibiza & Formentera), illustrated in the next chart. Balearic sales levels in 2007 were 162 pc higher than 2013, and by last year had risen to 127 above the base year. Still another 35 pc to reach the peak but not a bad recovery, and certainly a more healthy and sustainable level of sales than the 2007 frenzy. Unfortunately, the latest data suggests that sales are falling again in the Balearics faster than anywhere else in Spain (down 22 pc in Q2).

Cádiz wins the provincial prize

The province where the boom and bust cycle was most pronounced was Andalusia’s Cádiz (final chart), home to the Costa de la Luz and foreign-buyer hotspots like Sotogrande and Tarifa. Sales in 2007 were 221 pc above 2013, and by 2022 they were 144 pc above (first equal with Valencia province, which was second highest in 2007). Still a long way from the sales volume in the boom year of 2007, but once again more healthy and sustainable.

So it seems that where sales boom the most they also crash the hardest, and then recover the best, in Spain at least. Next week I’ll create a similar index of house prices and see if they tell a similar story. My guess is they do in general, though I know that prices in some parts of the Balearics like Formentera never went down in the crash because there was always more demand than supply. That said, the private island of Espalmador (Formentera), which I sold for €18m in 2018 (I handled the sale, it wasn’t my island), had a written offer of €30m in the boom years, so if you use that as a comparable, prices declined by 40 pc. But it’s not a very good comparable – too unique.

* Data from the MITMA government department going further back than the INE shows that the market peaked in 2006 with 955,000 Spanish home sales that year, falling to 837,000 in 2007 compared to 775,000 according to the INE.

Data hub subscribers can take a deep dive into the data and the most comprehensive table of home sales in Spain.