Spanish property sector continues to struggle as home sales drop

Spain’s property sector is still struggling to recover from a half-decade downturn, according to figures showing that home sales dropped by 16 per cent in November compared with the same month in 2012.

Just under 22,000 homes were sold during that month, the National Statistics Institute (INE) reported yesterday, the second-biggest year-on-year dip since the economic crisis started to bite in 2008. It was also 4.1 per cent fewer homes than the previous month.

Earlier this month, real estate valuation firm Sociedad de Tasación published figures showing that property prices across Spain dropped by just under 8 per cent last year.

The company estimated that Spanish house prices have dropped by 39 per cent since their 2007 peak and are now at 2002 levels.

Economic growth
However, while the drop in prices appears to be levelling out somewhat, the continued shortfall in purchases appears to contradict the government's assertion that Spain's return to economic growth is stabilising the property market.

Spanish economy minister Luis de Guindos reiterated this view on Monday, when he revealed that GDP grew by 0.3 per cent in the fourth quarter of last year.

This followed growth of 0.1 per cent in the third quarter and the minister hailed the news as part of a “tangible and real recovery” after two years of recession.

However, by the government’s own admission, the recovery is still weak and with unemployment at close to 26 per cent, demand remains thin. Despite the ongoing drop in house prices, many analysts believe they need to fall further to entice buyers.

"Credit is still being choked and potential buyers don't have access to property at its current prices," said Fernando Encinar, head of studies at property website Idealista.

'Disastrous'
He added that the "most disastrous figure" unveiled yesterday was that of the sale of new properties, which fell by 22 per cent from a year earlier to 9,800 units.

The regional government of Madrid has also been a victim of the ongoing lack of demand. Last year it managed to raise only €240 million by selling off property, instead of the €742 million it was aiming to generate to cover its debts.

Spanish prime minister Mariano Rajoy met IMF managing director Christine Lagarde in Washington on Monday. According to an IMF spokesperson, "they shared views on recent economic developments in Europe and Spain, and the challenge of ensuring that the ongoing recovery leads to strong growth and job creation, building on the achievements attained so far".

Mr Rajoy also met US president Barack Obama.