Spain House Sales Statistics

We’ll chalk up the mere existence of a recent remarkably inane bit of ‘research’ on the Spanish banking/real estate conundrum emanating from Nomura (via Alphaville) to a last ditch attempt to pressure the issue price of the now imminent Bankia IPO and limit ourselves to remarking that the piece likely, seeing the level to which the enemy’s arguments have been reduced, bodes moderately well for the market debut of Rodrigo Rato’s amalgamation of Caja Madrid, Bancaja and various others. What is of interest however, especially seeing as the INE’s home sales statistics were released on Friday, is the tremendous recent disconnect between these figures and those produced by the Housing Secretariat of the Ministry of Public Works – the ones used by Nomura in its analysis.

Regular readers will have noted that, last June, we related that the MVIV index (as it was known then) fairly consistently reported more house sales than the Instituto Nacional de Estadística. Since then, we hadn’t really followed the issue, so one can imagine our surprise when today we saw that the former reports 26,246 new homes as having been sold in the first quarter, whilst the INE places this number at 60,991.Tracking backwards along the chart at the top, it can be seen that this pronounced state change took hold in the third quarter of 2010.

Part of this discrepancy can be attributed to the differing methodologies of the two organizations. Fomento uses figures reported by the country’s notaries, and the INE from the property registrars. The latter, despite the lag in reporting times, is the only proper measure because it reports all transactions that were actually completed. We had attributed the excess reported by the former to notarial agreements not meeting the legal standards of the registrars, being returned, redrafted and then double counted. The notaries are not equipped for, or interested in, this kind of record keeping. The registrars, through their national database, are. But to have turned in vastly smaller numbers of transactions... that will take some explaining.

Our immediate, dumb guess is that, because it became an open secret over the summer of 2010 that the original keepers of the MVIV figures – the Ministerio de Vivienda - were to be eliminated and folded into Public Works, or Fomento, as a cost saving measure (an event that took place in late October), their already shoddy statistical department found itself even less equipped to do the job it had been assigned – part of which was surely coaxing the numbers out of a disinterested College of Notaries. In any regard, somebody’s got some explaining to do.

The charts of the INE numbers show that both new and used sales are setting series minima – the demise of tax incentives to buy and the falling of Easter week. Again, it will be a while before one gets a fix on what is now normal.

We won’t grace its conclusion with a critique, but readers who have clicked through to the Alphaville piece might like to know that:

1). The 300 billion euro total real estate sector debt is correct. For the purposes of the piece, loans to the commercial real estate sector have to be backed out of the total;

2). Entirely apart from whether figures from Fomento (likely erroneous) or the INE are used, new home sales alone do not properly report the depletion rate of new housing stock. ‘New’, in the legal sense, only refers to whether it is the first time that a property has been registered to an owner who is not the promoter. Some not insignificant percent of second-hand sales will in fact be brand new, never occupied homes that had seen an intermediate title change through repossession or an equity-for-debt exchange.

Also interesting is that a variety of Google searches failed to show the Nomura thing as getting any traction at all in the noise-o-sphere. Apparently, even the Millionth Monkey wouldn’t touch it.

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