House sales climb again after falling for three years

Experts says prices need to fall further for solid recovery

Home sales rose for the first time in four years in Spain, although the main drivers of the increase were one-off factors, with the real estate market still stuck in the doldrums.

The Public Works Ministry said Monday sales in 2011 were up 5.9 percent at 491,000 units. In the fourth quarter alone, purchases were up 14.2 percent at 150,268 units. Of the total sold, 59.3 percent were existing homes and 40.7 percent new homes.

The government raised the valued-added tax rate on new housing sales to 8 percent from 7 percent, effective July, and also removed tax breaks for purchasing a family home for all but lower-income groups. The housing market is still trying to shake off the unwelcome legacy of a decade-long boom that turned into a bubble and burst, leaving a massive over-supply that is yet to be run down.

While house prices have been falling from their peaks at the end of 2007, experts believe they need to drop more to eliminate the stock of unsold homes. Demand has also been impacted by the fact that one-fifth of Spain's working population is out of a job.

Fernando Encinar, the founder of the popular property sector website, said the main reason behind the pick-up in sales was the pending removal of tax breaks and because of a particularly weak 2009, which he described as the "annus horribilis" of the sector. He said that the key to the recovery was prices, which have to fall more.

The ministry said that home sales rose in 11 of the country's 17 regions and in the North African enclaves of Ceuta and Melilla. Sales in the Basque Country in the north jumped 30 percent from a year earlier, but they fell by 16.3 percent in the southwest region of Murcia.

Recomendaciones EL PAÍS
Recomendaciones EL PAÍS