Brief housing market rally hits brick wall

After an interlude of just a few months, Spain’s floundering housing market turned negative again in November as sales fell once more.

According to figures released Monday by the National Statistics Institute, home purchases declined 6.1 percent from a year earlier in the penultimate month of 2012 to just 25,655.

Sales had picked up in the summer after falling 17 months in a row ahead of the hike in the value-added tax rate on new home purchases from 4 percent to 10 percent and the removal of tax relief on servicing mortgage payments on the family home.

There is a certain delay in the INE’s sales figures since they are based on ownership changes at property registries rather than when the actual purchase is made.

Despite homes losing about a third of their average value since a massive property bubble burst around the start of 2008, the market is still conditioned on the demand side by massive unemployment, with Spain’s jobless rate in November over double that of the European Union at 26.6 percent.

On the supply side, the country’s real estate developers built up an estimated pile of 700,000 unsold homes, many of which remain in the hands of the banks. The government has set up a so-called “bad bank” to absorb the toxic assets of the country’s lenders, most of which are related to the real estate sector.