Spanish Property Transactions Down by 42%
January 9th, 2009
The Ministry of Housing recently released their provisional figures for Q3 of 2008. You can download the revised, sanitised and translated MVIV figures from Kyero.com.
Most of the data released by the Ministry of Housing (MVIV) is unreliable because it uses property valuations rather than actual sales prices. However, the Ministry’s figures for the number of property transactions is rock-solid, and provides a useful insight into Spanish property market trends.
The big story is that developers are forging ahead with sales of new build properties – at the expense of the resales market. Even so, in most areas of Spain, sales of both new build and resale properties were dramatically lower, comparing Q3 2008 with Q3 2007.
Overall, the volume of property transactions completed in Q3 2008 reduced by 42% YoY. Sales of new build properties reduced by 25%, with resales transactions decreasing by 50%.
Sales of new build properties decreased in almost every province – Huesca saw the largest decline at 42% YoY. However, as developers in some provinces rush to complete, sales of new builds actually increased – three by 70% or more:
| Increased new build transactions Q3 2007/2008 | |
| Province | % increase |
| Murcia | +1% |
| Santa Cruz de Tenerife | +3% |
| Córdoba | +5% |
| Badajoz | +13% |
| Extremadura | +18% |
| Cáceres | +26% |
| Jaén | +27% |
| Teruel | +70% |
| Álava | +71% |
| Zamora | +77% |
Across Spain, the number of resales transactions fell in every province, Alicante was the worst hit – recording a decrease of 59% YoY.
The reduction in the volume of transactions in Q3 2008 translates to an overall reduction in spending of almost 11Bn Euros in Q3 2008 – 3.5Bn less on new build properties and 7.5Bn less on resale properties. Only one province, Teruel, saw an increase in overall spending – by 11M Euros – thanks mostly to increased sales of new build properties.
The fact that the resales market is suffering more than the new build market is not surprising for two reasons:
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Sales of new build properties completed in Q3 2008 were actually contracted some years earlier. Buyers of these properties are under contract to complete or forfeit their deposit money. Developers are forging ahead to complete on developments to bolster their cash flow.
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Developers have a lot more scope and motivation to reduce prices of new build properties than do vendors of resale properties. As the Kyero Q4 2008 Spanish house price index demonstrates, vendors persist with unrealistic pricing of their properties – hence they are not selling.
The Spanish National Institute of Statistics (INE) also released their Q3 2008 House Price Index recently. It showed a 3.7% increase YoY for new build housing and an 8.6% decrease in resale property prices comparing Q3 2008 with Q3 2007.
However, the INE figures are calculated using values from notarised property transactions, which are unreliable. Tax evasion is widespread in Spain, and it is common practice to under-declare the notarised value of a property transaction – rendering the INE figures all but useless.
The well documented glut of new build properties is estimated to be over 1 million units which, at the current rate, will take two years or more to be absorbed into the market. Until that happens, expect the number of resales transactions to suffer – except for homes which are priced to complete with comparable new build properties.
Related Posts
- Spanish Property Transfers Fall 14%
- Spanish Government Data Conceals Scope of Downturn
- Q2 2008 Spanish Housing Ministry Figures Released
