The Latest Spanish Property News from Kyero.com
May 14th, 2008
Data recently released by the Spanish Ministry of Housing for 2007 reveals that the market slowed by at least 11% in 2007 compared to the previous year. The total Euro value of property transactions fell from €159 Billion in 2006 to €142 Billion in 2007.
| 2005 | % +/- | 2006 | % +/- | 2007 | % +/- | |
| Q1 | €27.3B | +22.9% | €37.4B | +37.2% | €38.9B | +4.0% |
| Q2 | €34.9B | +22.9% | €41.5B | +18.9% | €39.7B | -4.2% |
| Q3 | €31.9B | +23.4 | €36.8B | +15.6 | €31.9B | -13.5% |
| Q4 | €37.9B | +24.4% | €42.9B | +13.1% | €31.3B | -27.0% |
| Total | €132B | +23.5% | €159B | +20.3% | €142B | -10.6% |
The year-on-year slowdown is actually likely to be closer to 15% as the government figures do not account for cash changing hands as part of a property transaction. Due to a government crackdown, more property deals are now more completely notarised than previously. This has the effect of making current prices appear to have grown - when in fact the growth is due to a greater proportion of the transaction being notarised.
The Government trends are further compromised because they combine sales of newly built properties with those of resales. This means that market trends are obscured because sales of newly built properties today were essentially transacted several years ago - but completed today.
Today's sales of new build properties are a reflection of market activity several years in the past, not an indication of the current health of the market. Finally, a further muddying of the official figures occurs because sales of subsidised housing are often included.
Analysing the volume of non-subsidised resale property transactions is the best indication of longer term property market trends in Spain.
The number of resale transactions fell from 532,838 in 2006 to 403,642 in 2007 - a 24% decrease year-on-year. What escapes many analysts is that this isn't a new trend. The number of transactions have been declining steadily since Q2 2006, with Q4 2007 showing a hefty 41% decrease in just 12 months.
| 2005 | % +/- | 2006 | % +/- | 2007 | % +/- | |
| Q1 | 125,717 | +4.5% | 136,363 | +8.5% | 122,087 | -10.5% |
| Q2 | 148,922 | +5.1% | 145,289 | -2.4% | 116,508 | -19.8% |
| Q3 | 122,405 | -1.9% | 117,109 | -4.3% | 85,044 | -27.4% |
| Q4 | 151,585 | +2.8% | 132,071 | -12.9% | 77,996 | -40.9% |
| Total | 550,634 | +2.7% | 532,838 | -3.2% | 403,642 | -24.2% |
If we compare the sales volume of new build properties, we see a very different picture because it lags the resales trend by at least 18 months.
The 2007 new build figures below show a similar trend to the 2006 resales figures - and are clearly on the decline.
| 2005 | % +/- | 2006 | % +/- | 2007 | % +/- | |
| Q1 | 60,950 | +4.6% | 86,358 | +41.7% | 89,712 | +3.9% |
| Q2 | 80,216 | +13.3% | 94,333 | +17.6% | 93,733 | -0.6% |
| Q3 | 82,842 | +25.2 | 93,081 | +12.4 | 86,836 | -6.7% |
| Q4 | 82,052 | +13.6% | 103,384 | +26.0% | 90,068 | -12.9% |
| Total | 306,060 | +14.4% | 377,156 | +23.2% | 360,349 | -4.5% |
Compare these two sets of numbers to the official market index from the Spanish government. Below, they add in subsidised housing and present their index of the market trend.
| 2006 | 2007 | |
| Q1 | +11.8% | +7.2% |
| Q2 | +10.6% | +5.8% |
| Q3 | +9.8 | +5.3% |
| Q4 | +9.1% | +4.9% |
| Total | +10.3% | +5.8% |
The Government line until quite recently has been that price growth was slowing down but that prices increased in 2007. In reality the volume of resales has fallen by 24%, the volume of new builds by 5% - and house prices have definitely not increased to compensate for this overall decrease in volume. Overall the number of property transactions is down from 909,994 in 2006 to 763,991 in 2007 - a decrease of 16%.
With such a marked slowdown in the Spanish property market, the question everyone asks is "Why aren't we seeing house prices falling by 20-30%?" The broad answer is that only 'distressed sellers' are willing to negotiate aggressively on price at the moment.
In the category of 'distressed' we find individuals who must sell for whatever reason and developers who need to service their bank debt. These two categories do not constitute the entire market by any means - and it is for that reason that asking prices have not fallen across the board.
The property market in Spain is a buyers market currently IF the seller needs to sell. Many sellers are maintaining their asking prices and are happy to wait until the market bounces back.
Download the updated and translated data from the Spanish Ministry of Housing
Martin Dell, Kyero.com
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