Cash is still king for half of all home purchases in Malaga province so far this year

In Spain as a whole the mortgage market is more dominant with 65% of house purchases requiring some form of financing from the banks

Cristina Vallejo

Malaga

Friday, 25 October 2024, 14:56

"There are some people from Malaga who can pay for their flats without mortgages, not all of them are poor." With these words, spoken at the last full meeting of Malaga city council this month, the councillor for Urbanismo (city planning), Carmen Casero, kicked up a real storm. The INE (Spain's national statistics institute) almost always publishes the statistics on home sales and mortgages separately on different days. However, on this occasion as chance would have it, both data sets were released together on Thursday this week. So Casero's words can be fact-checked against the official data.

According to INE's figures, between January and August 22,919 home sales and purchases were made in the province of Malaga. In the same period, the number of mortgage loans taken out was 12,354. So around half of the houses that have been purchased in the province so far this year have been paid for in cash. To be precise, according to the INE figures, 46% of all property sales and purchases did not require a mortgage, compared to the 54% where the purchasers did go to a bank for borrowing.

So, is Malaga an exception to the rule or does it reflect what is the norm in the country as a whole? According to the figures published by the INE, in the first eight months of the year the number of property sales and purchases has reached almost 406,000, while the volume of mortgages taken out stands at 260,174. In Spain, therefore, the number of property transactions is also higher than mortgage activity, but the proportion of homes that required bank financing is higher than in Malaga. At the national level 64% of homes purchased were bought with a mortgage compared to 36% that were paid for in cash.

30.81% of homes bought in Malaga

are purchased by foreigners. The weight of foreign clients in Spain as a whole is barely 15%, according to figures from the association of property registrars for the second quarter of 2024.

However, these figures need to be seen in the context provided by the association of property registrars. According to their latest data (second quarter of this year), Malaga is the fourth largest province in Spain in terms of foreign home purchases. Almost one out of every three houses purchased in this area (30.81%) is owned by a foreigner. Malaga comes after Alicante (43.52%), Santa Cruz de Tenerife (37.20%) and the Balearic Islands (33.37%). In the country as a whole, the weight of home purchases by foreigners during the second quarter of this year was less than 15%. Therefore, the weight of foreign buyers in the Malaga property market is double that recorded at national level.

Parallel developments

If we look a little deeper into the figures, we can see that the activity around sales and mortgages is moving practically in parallel. In short, housing transactions are suffering this year in much the same way as the underwriting of home loans. So the 12,354 mortgages signed for between January and August 2024 contrast with the 13,046 recorded for the same period in 2023, a fall of 5.3%. At the same time, the almost 23,000 homes bought in Malaga province in the first eight months of the year are 5% less than the 24,144 bought by the same time last year. It follows that the proportion of homes paid for in cash and those financed with the help of the banks has remained virtually stable year-on-year.

Meanwhile, what has happened in Spain as a whole? The number of sales so far this year has fallen by 1% year-on-year, from 410,270 between January and August 2023 to around 406,000 so far in 2024. In contrast, the number of mortgages signed for has remained practically unchanged from one year to the next, slightly above 260,000 deals done.

However, the picture in Malaga is quite different if we look at what happened in the last month for which data are available. In August there were 2,789 property sales completed, a fall of almost 10% compared to almost 3,100 in the same month a year earlier. In contrast, the number of mortgages signed in August was 1,764, an increase of 24% compared with the 1,422 recorded in August 2023.

In Spain as a whole, the number of mortgages signed in August alone grew by nearly 9% to over 30,600. Meanwhile, sales and purchases remained practically unchanged at around 49,000.

According to the opinion of Santiago Martínez Morando, head of economic and financial analysis at Ibercaja, for the figures published in Spain as a whole, "the positive movements in employment and wages and the containment of interest rates, in particular the 12-month Euribor, which is at around 2,6% when a year ago it reached highs of 4.2%, lead us to expect continued dynamism in this new real estate cycle, which is also driven by demographic changes going on in the background (the population of the age of emancipation is increasing after a fall of more than 30% accumulated over fifteen years)." Still, Martínez Morando adds that "the tensions generated in prices by the shortage of [housing] supply pose a risk until they are resolved."

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