The latest INE data referring to the sale of homes in Spain, they reflect that there has been a decline in 2019 of 3.3%, going from 518,000 to 501,100 transactions, being the first setback experienced by the Spanish real estate market since 2013.
In fact, this data contrasts significantly with its recent history. In 2018, sales rose 10.8%, in 2017 15.4%, and in 2016 14%.
It is a very important fact, because the housing purchase indicator is closely linked to the confidence of economic agents in the Spanish economy and its perspectives.
We have already seen how, in recent months, a series of dynamic data has been getting worse such as the evolution of GDP, the slowdown in Social Security affiliation and the fall in unemployment and this is another fact that must be added to the deterioration that is being seen.
Causes of the contraction of the sale
If we previously saw rates higher than 10% in sales advances, a negative reference as seen in the previous year reflects a drastic change in behavior economic agents that make up the real estate market.
But what relevant events have happened in 2019 so that economic agents have substantially changed their behavior?
First, we must refer to June of last year in which the new mortgage law was passed in which a series of changes of great importance were integrated.
Before the new law, the client had to face different expenses such as notary agency, the registration of housing and also the appraisal. With this law, except for the appraisal eat the bank would assume the rest of expenses. At the same time, we have to incorporate that the tax of documented legal acts that the client pays was paid by the banking entities.
This modification in the regulatory field led operations during the summer months because the new regulatory requirements had to be met. A very significant fact is that only in the month of August there was a crash of up to 21.1% in sales.
Despite the change in the legislative environment, Another catalyst for the negative variation in sales has been due to the decrease in demand, the result of a serious deterioration of consumer confidence linked to the political uncertainty experienced and the slowdown of the Spanish economies.
To do this, we can see the Consumer Confidence Indicator (ICC) what decreased from December 2018 to December 2019 13.2 points, with a loss in absolute terms for the assessment of the current situation of 13.3 points and expectations, which offer a practically equal decrease of -13 points.
Perception has been negatively altered in all areas. The valuation of the economic situation drops 18.9 points compared to a year ago, the options offered by the labor market are valued 18.2 points below the value of a year ago, while the situation in households limits its fall to 2.9 points in the last twelve months.
The importance of the real estate market in Spain
The sale of homes, either by the mere fact of living or as an investment, It is part of the central axis of the Spanish real estate market and, for many Spaniards, it will be the most valuable asset in their entire lives.
Specifically, in Spain, the sale of homes acquires a more important connotation than in other countries because the percentage of homes with home ownership in 2018 was 76.1% (Survey of Living Conditions of the INE).
Investment in housing is a small but unpredictable part of how we measure the total production of the economy. If you buy a newly built home, it contributes directly to GDP, for example, by investing in land and building materials, as well as creating jobs.
On the other hand, if we refer to the sale of existing homes does not affect GDP in the same way. However, the costs that accompany a housing transaction continue to benefit the economy.