2023-09-03 03:10:20
The mortgage is the last bill that any family, even if it is in trouble, stops paying. No one wants to be left without a roof to shelter under. But the truth is that housing loans, which usually constitute the main expense of Spanish households, eat up more and more of their income. To the point that, if rates continue to rise, you could end up absorbing almost half of your disposable income. A situation that does not seem so far away.
As OBS Business School professor Carlos Balado explains in his report “The imbalances in the Spanish real estate market”, after eight years of negative interest rates and savings levels at maximum levels accumulated during the pandemic period, there has been a rise drastically in interest rates to slow down the rise in prices in the economy. This caused a “completely vertical escalation of the Euribor” starting in the summer (in April it was still negative and in mid-August it was still around 1%). A circumstance that led, in turn, to the fact that the mortgage payments of many households began to increase substantially at the end of the year. At the beginning of 2023, the analysis adds, the variable-rate mortgages revised in the first quarter went from applying a zero Euribor to approximately 3.5%. Thus, if in 2021 the mortgage payment used to represent on average in Spain around 30% of family income, a rise like this is heading directly towards 45%.
Al raises
The analysis ensures that the forecast, given the level of interest rates and the impact of inflation on household income, is that the cost of housing represents close to 37.8% of household income in the middle of 2023, levels not reached since 2009. However, according to its author, the rule for calculating this effort estimates that each additional point of mortgage type increases the financial cost to disposable income ratio (which is taken as an indicator of effort) in 4 percentage points. In this way, if mortgage interest rates were to stand at 4%, the effort indicator would increase to 44.1%. In June, these rates were already at 3.7%, according to data from the Bank of Spain. However, renegotiations are already being signed above 4%, according to data from the institution.
stoppage of activity
The dizzying rise in the cost of loans is the reason, according to the report, that the number of housing transactions in 2023 slows down significantly-purchases have fallen by 7.3% in the second quarter, according to the latest data from the Registrars- and it can make those people who do not see a propitious moment for the purchase of their first home opt for renting, which can suppose a greater upward pressure on these prices.
The report not only affects the greater difficulties that the rise in rates is introducing to access a home, but also the increase in prices that has not yet reached its ceiling. In this regard, he assures that there is “a gap between low supply and high demand, especially at “affordable” prices.” According to him, if between 2020 and 2022 420,000 new homes were created in Spain, the number of homes started barely reached 300,000. This, he assures, is due to the high construction costs (although the author affirms that a moderation is expected given the recent evolution of the price of energy and industrial metals in the international markets), the scarcity of developable land (every increasingly expensive, especially in the urban area and the prime areas of the main cities) and the difficulties or delays in obtaining building permits (which, according to him, suppose an extra cost for the buyer of more than 12,000 euros per home ).
more affordable housing
To help groups with more difficulties to access one of these affordable homes, the document highlights the need to resume the construction of subsidized housing (VPO), encourage and facilitate the work of housing cooperatives with the transfer of land and aid for the promotion of protected buildings. In Spain, he recalls, “there is a social housing park of 290,000 units that provide coverage for 1.6% of families. This percentage places our country in one of the last positions in the EU, with a clear deficit if we compare it with the figures of the Netherlands, where the proportion of social housing reaches 30% of families, Austria (24%) or Denmark (20.9%)”.
Although initiatives have recently been proposed to increase the investment effort in public sector housing with the aim of achieving a progressive increase in the public stock of social rental housing in the medium and long term, the OBS report considers it essential to implement policies of public-private collaboration to be able to incorporate affordable or appraised-price housing into the market that balances the market. “The Government and the private sector are obliged to work so that the Officially Protected Housing Plans are reissued, a rental housing stock is promoted and a financing program is implemented for small owners who rehabilitate their apartments and put them up for rent. at affordable prices,” says Balado.
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