The latest figures from Spain’s National Institute of Statistics (INE) shows that sales increased by 10% in July on an annual basis and by 9% on a quarterly basis.
‘After five consecutive months of annualised sales increases it’s clear the Spanish property market is starting to recover in volume terms, as more buyers enter the market. The figures confirm that overall sales are now stable, if not growing slightly,’ said Mark Stucklin of Spanish Property Insight.
‘Markets are all about transactions and prices, which determine volume and value. Increasing transactions are a sign of confidence that improve liquidity and reduce risk. When buyers outnumber sellers prices start to rise. After almost eight years of consecutive declines in home sales, that is welcome news for Spain but it doesn’t mean the Spanish property crisis is over,’ he warned.
‘It’s now crystal clear that the Spanish property market has established a floor in transaction terms, suggesting sales are unlikely to fall any further. If anything they will continue growing, as they have for the last five month. The question is how sickly or robust will the sales recovery turn out to be,’ he added.
The INE doesn’t break down monthly sales figures by nationality, but Stucklin and other real estate experts point out that foreign buyers are driving the sales increase. This suggests that there is plenty of scope for further increases when local demand picks up with falling unemployment and easier mortgage lending.
Looking at sales by previous ownership, the trend towards resales continues, with new sales down 8.3% in a year, and resales up 26.8%. ‘Expect the trend to continue as the pipeline of new homes that people actually want to buy dries up over the next year or so. Housing starts have collapsed by 95% since the boom, and the Spanish home building industry has all but disappeared. It might not be a bad time to invest off-plan, if you can find anything to buy off-plan that is,’ said Stucklin.
He also pointed out that the label ‘new home’ is starting to lose its meaning in Spain, as most of the new homes currently on the market were built years ago so are now far from being new. Built during a boom when standards fell and prices rose these homes have been collecting dust and depreciating for years.
Looking at sales by region, some of the biggest increases took place in the provinces of the interior, for example Cáceres saw sales increase by 87%, albeit from a low base. Sales in some coastal areas like Málaga’s Costa del Sol where foreigners tend to buy, were above the national average.
‘For the time being, and likely for some time to come, sellers outnumber buyers in the Spanish property market, so price pressures will remain muted at a national level,’ Stucklin said.
‘It doesn’t help that the biggest vendors of all are Spanish banks, who are probably the worst property sales organisations on the planet, and not much better at banking. On the other hand, Spanish estate agents report that demand pressures are already starting to build in prime segments of Barcelona, Madrid, and the best resort towns of the coast, so investors and vendors will learn more looking at segments than national averages,’ he added.
The INE data also shows that average Spanish rental prices fell 0.7% over the 12 months to the end of August. Average rents in Spain have now fallen every month since April last year.
A breakdown of the data shows that rents fell last month in 15 out of Spain’s 17 regions, but rose a fraction in Catalonia and Asturias.
Compared to house prices, rents are now in negative territory whilst house prices are rising for the first time since the first quarter of 2008, meaning that rental yields are shrinking. Falling rental yields diminish the appeal of property as an investment, however, rental yields have improved considerably since 2007, as rents have risen 10 per cent whilst house prices have fallen 33%.
‘Falling rental prices reflect the continued economic crisis and levels of supply and demand. There is an overall surplus supply of rental properties in Spain, but at the same time agents report there is a shortage of attractive rental properties in prime area,’ said Stucklin.
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