This week saw data coming out of Spain for both property sales for October and the house price index for November 2013.
What is happening to property prices in Spain
In November the annual decrease of house prices slowed in terms of the same month in the previous year. In general across all areas house prices are now at 2003 levels but remain above the average price per square meter when compared to 2002 and 2001.
In some areas the average price per square meter has in fact fallen to 2002 levels which was when the boom started to take hold. In particular this is true of the Coastal areas.
The Costas average price per meter square is now 1414 Euros, in November 2003 this was 1549 Euros and at its peak the average price per square meter hit 2468 Euros.
The Balearics and the Canaries showed the least decline of all areas in Spain for November, and this is reflected in the buyers of property in this part of Spain which are up by over 30% year on year in the Canaries,and with the Balearics showing only a very small decline of half a percent in sales of properties year on year and increases month on month in the latter part of 2013.
Interestingly both the Balearics and the Canaries performed below the general index in the boom times and have fallen from their peak by 27.3% in comparison to other coastal areas which have fallen by 45.45 since their peak.
The coastal areas in comparison to the Islands outperformed the general increases during boom times, whereas in 2002 the prices were in line with other areas of Spain.Since the current falls the Coastal areas are now back in line on price per square meter with the whole of Spain.
The House Index data is compiled by TINSA and is based on a range of 200,000 properties.
House sales in Spain
Transfer of properties across all properties and all types of transactions in October was 6.4% more than the same month of the previous year but when this data is broken down into the sales of actual dwellings there was a decrease of 10% from October 2012 to October 2013.
The only area seeing large increases is other titles which includes the repossession of properties taken over by the Banks. In this area the increase was 24.8% from the previous month of September, 38.6% up from October 2012 and an overall annual increase of 15.6%.
What type of property is selling
Urban properties formed 81.3% of total sales but of this only 53.5% related to dwellings (buying of residential homes in Spain). The annual rate of sales relating to urban properties registered as dwellings decreased by 10.9%. Rustica or country properties bucked the general trend showing an annual increase of 5.2%.
Are there any positives to be taken from the house sale data
The month by month fall in numbers of properties sold September to October was the second lowest since 2009. Only 2012 showed a smaller decrease but sales in October last year were buoyed by the last minute rush to beat the end of the Spanish tax incentives put in place in 2012.This skewed house sales in the last quarter of 2012 and is not therefore necessarily a good indication that 2013 in general terms is below that of 2012.
The confirmation that the tax incentives for new properties temporarily assisted sales in Spain can be seen in the monthly data where the sale of new properties has decreased by 17.6% from the same month of the previous year whereas resale’s only declined by 2.9% over the same period.
How did the regions perform in October
Andalucía showed a marginal increase in the number of residential properties sold and is one of only three regions showing any annual increase. The Canaries, whilst off the back of relatively small numbers, is showing an annual increase in house sales of 32.3%.The only other region with any increase in 2013 is Cataluña. In general the coastal areas which attract nonresident buyers are holding up better than the metropolitan and city areas.
The total number of house sales relating to urban dwellings in October was 57,198 and 34,629 of Country properties. Of this the most sales at 10,615 were made in Andalucía.
The number of other titles which included Bank repossessions totaled 21,477.
Both sets of data suggest that the decreases in both house prices and sales is slowing but apart from the Canary Islands and Andalucía there is nothing to suggest the bottom of the market has yet been reached.
It has long been my view that prices would need to come back in line with pre 2002 prices before the market stabilized. This seems to be borne out by the current figures where in areas where we have seen falls to below 2002 prices, sales are beginning to show signs of increasing, all be it slowly.
Unfortunately fundamental to an ongoing recovery is the need for the mortgage market in Spain to recover. The last published figures showed that only 15,000 mortgages in Spain were granted in September this year which is well below the number of properties sold. There are not enough cash buyers to allow any sustained growth without the Spanish Banks staring to lend again and doing so at reasonable rates.