Crisis in the Spanish real estate market: prices rise while sales fall.

The real estate market in Spain is at a crossroads that has sparked intense debate among experts and analysts. Over the past decade, housing prices have shown a consistent upward trend, reaching an increase of 7.8% in the second quarter of 2024 compared to the same period the previous year. However, this apparent prosperity in the sector contrasts with the sales figures reported by the National Institute of Statistics (INE), which indicate a decrease of 4.49% in real estate activity in the first half of the year, causing confusion among market participants. On one hand, the INE statistics, based on information from the Property Registries, reveal a clear decline in home sales, from 313,272 transactions in the first six months of 2023 to 299,223 in the same period of 2024. On the other hand, the General Council of Notaries reports an increase of 5.86% in home sales during the same time, rising from 330,874 to 350,254 transactions. This discrepancy in the data has raised a series of questions about the true nature of the Spanish real estate market. The INE data is particularly alarming when considered in the context of the increasing pressure exerted by the European Central Bank (ECB) raising interest rates. The rising cost of mortgages has affected the purchasing power of many potential homeowners, which could be behind the drop in real estate transactions according to the INE. In contrast, the General Council of Notaries argues that the recent easing in monetary policy may have revitalized the market, suggesting that real estate activity might be beginning to recover. In June, the discrepancy becomes even more evident: the INE reports a year-on-year decline of 6.12% in sales, while notaries indicate a growth of 3.9%. This phenomenon becomes more intriguing with the release of July statistics, where notaries report an impressive increase of 20.2% in transactions and a 31.1% rise in mortgages. The difference in measurements between these entities is partly attributable to the different times when the data is collected. Notarial statistics are based on the moment of signing the sales contract, whereas the INE's refer to the moment of registration in the Property Registries. This implies that there can be a lag of several months between both measurements, especially in transactions involving mortgages, where the process can extend up to two or three months after the signing in front of a notary. This suggests that the sales reported by notaries could be reflecting more recent real estate activity that has not yet been captured in the INE figures. Additionally, the situation is complicated by various factors that can influence registration times. For instance, in areas with high activity, there may be a shortage of registrars compared to the number of notaries, leading to delays in registration. There are also cases of self-promotions that, although completed, choose not to register their properties to continue taxing as land, which impacts the figures in the registries. José Miguel Tabares, the vice-dean of the College of Registrars, points out that the discrepancy between the statistics may also be related to the fact that the INE makes adjustments to the microdata it receives and that the sampling dates may vary. Furthermore, the registration statistics include administrative and judicial documents, making it broader than notarial statistics. Despite these discrepancies, there is a growing consensus that the real estate market is undergoing significant changes. According to María Teresa Barea, spokesperson for the General Council of Notaries, recent statistics indicate that the decline in sales has stagnated, and there is a clear upward trend in activity. This could indicate that the market is adapting to the new interest rates and economic conditions. As the publication of the INE figures for the third quarter is awaited, many wonder if this recovery trend in home sales can be confirmed. Experts warn that the future evolution of the market will largely depend on the direction interest rates take. A possible reduction in rates could incentivize sales and balance the divergent figures currently in play. In summary, the Spanish real estate landscape appears fragmented and full of nuances. The divergence between the figures from the INE and the General Council of Notaries reflects a market in transition, where the dynamics of supply and demand, along with financial conditions, play a crucial role in shaping the future of the sector. The key will lie in how the coming months unfold and whether changes in monetary policies will positively impact market activity.