Buyer Insights

House prices: More is less

Spanish house price growth is seen as a good thing. We’re not so sure.

House prices in Spain

Since beginning a steady recovery in 2014, the national House Price Index has risen 6.4%. Sales volumes followed a similar path and there is no doubt the market is getting back on its feet.

But there’s a sting: Why is mortgage lending still so low?

February saw another headline grabbing annual rise of 14% but the base is so tiny it masks the true story: Mortgage approvals in February 2016 were still nearly 80% below their peak in February 2006. With the economy growing, unemployment falling and house prices at all time lows, we could reasonably expect to see more Spaniards buying homes.

In 2014 that assumption began to go wrong:

Employment vs. Mortgages

Source: INE.es

Our interest was piqued enough to start looking further. To obtain a mortgage, buyers need to convince nervous banks they can really afford one, which leads to an obvious question…

How much does a home really cost?

Banks often use income multiples as a factor in mortgage decisions so we decided to compare average house prices with average salaries to check affordability. Lending 3-4 times annual income might be considered a safe range to the risk-averse banker.

Unfortunately that throws up a stark lending problem:

With wages broadly flat and prices rising, an affordability gap emerges. Spaniards need worryingly high mortgages (and deposits) to buy a home.

Province Avg. house price (€) Avg. salary (€) Income multiple
Balearic Islands 376,417 17,247 21.8
Girona 221,922 17,627 12.6
Málaga 154,786 15,128 10.2
Las Palmas 157,242 16,247 9.7
Huelva 117,400 12,289 9.6
Alicante 135,589 15,208 8.9
Santa Cruz de Tenerife 138,934 15,705 8.8
Barcelona 189,973 21,775 8.7
Cádiz 133,939 15,418 8.7
Segovia 140,924 16,818 8.4
Lleida 135,032 16,905 8.0
Pontevedra 135,241 17,014 7.9
Badajoz 99,915 13,308 7.5
Almería 95,905 13,160 7.3
Seville 112,860 15,580 7.2
Ourense 119,286 16,552 7.2
Córdoba 93,589 13,096 7.1
Cáceres 99,350 13,991 7.1
Murcia 109,801 15,621 7.0
Jaén 82,480 11,935 6.9
Granada 99,071 14,537 6.8
Toledo 109,348 16,066 6.8
Albacete 102,906 15,446 6.7
Cantabria 125,624 18,980 6.6
A Coruña 124,332 18,892 6.6
Lugo 108,725 16,724 6.5
Asturias 124,942 19,528 6.4
Tarragona 117,353 18,343 6.4
Huesca 108,981 17,155 6.4
Madrid 150,187 24,576 6.1
Ávila 95,649 15,853 6.0
Valencia 102,790 17,746 5.8
Cuenca 82,749 14,583 5.7
Castellón 94,848 16,767 5.7
Burgos 110,308 19,578 5.6
Ciudad Real 82,440 15,040 5.5
Guadalajara 106,777 19,620 5.4
La Rioja 95,931 18,354 5.2
Salamanca 89,504 17,605 5.1
Valladolid 92,472 19,254 4.8
León 84,637 17,715 4.8
Zamora 74,512 15,623 4.8
Teruel 80,207 17,114 4.7
Soria 84,663 18,112 4.7
Zaragoza 91,115 19,504 4.7
Palencia 78,094 17,754 4.4

Finding the balance

The Spanish property market now faces a dilemma if it is to continue a healthy recovery: Solid price rises encourage investment, but if they rise too fast they stifle already low domestic demand.

It’s true the market is unusually well supported by international buyers (who continue to show a willingness to buy) but a strong domestic recovery is key to long term growth. To see a sustainable rise in sales we need to close the affordability gap with more jobs, higher wages – and house price restraint.

We think annual growth in the 3-4% range is safe. Higher headline rises are unwelcome.


Nestoria.es

Dataset notes

Official sources don’t publish average house prices (only an index) so to obtain the most accurate housing valuations, we compiled asking price data in March 2016 from property portals Kyero.com and Nestoria.es – around 1.5 million listings. The latest national salary data is available from www.agenciatributaria.es.

Leer este artículo en español ›


Kyero.com

Kyero.com promotes 200,000 properties in Spain to international buyers in 13 languages

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