| Spanish housing transactions continue to experience upswing, mainly for existing houses |
| 09.09.10 12:01 | ||||||
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Spanish house transactions grew by 24.7% y/y in Q2, with a gain of 4.6% for new home sales (after sharply negative annual rates in prior quarters, eg -20.8% in Q1) and a surge of 48.3% in existing home sales (48.3% y/y, after 32.1% in Q1). The official data are unadjusted; we have seasonally adjusted the quarterly data. This provides evidence of a gradual upswing in transactions, which were 137k in Q2, the highest since Q2, 2008, though still well below the quarterly average pace of 209k in 2007 and of 239k at the peak of the housing boom in 2006. However, the Q2 transactions rate was off the low of 111k in Q2, 2009. As can be seen, the recovery has been more apparent so far in existing home sales rather than new home sales. Since there continues to be a glut of unsold new homes on the market (estimated by some analysts to be approximately one million units), it is likely that the inventory will continue to put some further downward pressure on house prices, particularly in certain regions. Our RH chart also shows the relationship of home sales in relation to housing affordability. The Bank of Spain's "affordability" index (which shows the proportion of average household income required to meet average repayments on an 80% LTV mortgage, on a median-price house (of 75m2) during the first year of payments, and taking into account mortgage tax relief and other deductions) fell in Q2 2010 to 27.1%, down from its peak of 42.5% in Q3, 2008, and the lowest since Q4 2004. Hence, we can see that the combination of falling house prices plus the shift lower in Euribor rates in the past two years has significantly improved Spanish housing affordability, which in turn seems to be helping transactions to rise. It should be noted that, from a euro area perspective, Spain stands out from other countries in having such a large glut of excess housing inventory (Ireland is the other country which, in relation to household formation, has also suffered from excess housebuilding prior to the financial crisis). source: BarCap
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