The Spanish property market shrank by 41% in January compared to the same month last year, according to the latest sales figures from Spain’s National Institute of Statistics. Not including social housing, there were 33,528 property transactions in January, compared to 56,738 a year before.

Year on year, sales were down -55% in the Balearics (to 654 transactions), -54% in Castellon ( Costa Azahar , to 586), -53% in Barcelona province (to 2,226), -52% in Cadiz province ( Costa de la Luz , to 804), and 50% in Alicante ( Costa Blanca , to 2,005). Malaga province, home to the Costa del Sol , did rather better, with sales down ‘only’ -24%, to 2,098 transactions.

This is bad news for those hoping for a quick recovery in the market, as it shows that real demand - that is people who want to buy and can afford to do so - is still tumbling, whilst the supply of property on the market is still growing. That will put further downward pressure on prices, encouraging more people to delay their purchase, putting more people into negative equity, and increasing the strain on the Spanish banking system.

The data for January also suggest that the long-expected nose-dive in newly built sales is starting to happen. Sales of newly built properties fell by 29% in January, compared to an annualised fall of just 14% in December. That means the rate of decline in new build sales more than doubled between December and January.

Given the slow rate at which developers signed up new customers in 2008, down more than 60% on average and more than 90% in some cases, new build sales can be expected to continue falling fast in the coming months.

Story from Mark Stucklin