After several months of a fragile recovery the Spanish housing market relapsed in October, falling 24% compared to the same month last year, according to the latest figures from the National Institute of Statistics (INE).
The chart above shows how total transactions (excluding social housing) evolved this year compared to the previous two years. It shows sales falling in October below 30,000 transactions per month for the first time since the market froze in April, when the international financial system almost broke down. Sales were also down by 10% on a monthly basis.
The next chart (below), giving the annualised percentage change every month this year, clearly shows how the market has relapse into decline after steadily improving since April.
What’s going on? Why the setback?
I think the answer can be found in the breakdown between new build and resales.
All year sales of newly built homes have been higher than resales, whereas in normal years it’s the other way around. If new build sales hadn’t been higher this year the market crash would have been significantly worse.
But many of the new build sales recorded this year were actually sold off plan during the boom, and many others were banks buying properties from developers to keep them afloat, so not really sales at all. If those sources of sales start to dry up, then new build sales will head south.
As you can see from this chart, new build sales dropped sharply in October, almost to the level of resales.
And the next chart shows how, compared to last year, resales have stabilised (around 13% down), whilst new build sales are declining fast, by as much as 30% in October.
We’ll have to wait a couple of months to know if the decline in new build sales is just a temporary setback or a worrying trend.