Salary Increases and Reduction of Purchase-Related Costs Follow, According to a Survey by UCI. Housing Prices are the Main Obstacle.
Marcos Delgado
July 4, 2024, 6:01 AM
Access to housing is one of the major issues in today’s society. Limited supply and high residential demand, administrative hurdles for construction permits, inflation, low wages, and rising housing prices are some of the factors that have made housing a primary concern for Spaniards, according to the CIS.
Recommendations to Facilitate Access to Housing
In this scenario, Unión de Créditos Inmobiliarios (UCI), an entity specializing in sustainable financing, conducted a survey to understand the measures citizens consider necessary to resolve the housing access problem. The primary measure highlighted by Spaniards, with 57.4%, is lowering interest rates.
Despite the European Central Bank (ECB) announcing in early June the first cut in the price of money in eight years, bringing it to 4.25%, more than half of the respondents believe that this move is not enough to facilitate access to housing. However, the monetary authority has tempered expectations that rates might fall again in the July meeting, while the market anticipates one or two more cuts this year.
Following this initiative are salary increases (55%) and reducing purchase-related costs (52.3%). Below these options is the possibility of obtaining 90% or 100% financing (43%), compared to the average 80% granted by banks, and reinstating tax incentives for the purchase of a primary residence (40%). The least valued incentives are rent-to-own (30.19%) and increasing the stock of protected housing (25.30%).
Necessary Measures to Improve Access to Housing
| Initiative | Percentage |
|---|---|
| Lower interest rates | 57.4% |
| Salary increases | 55.0% |
| Reduce purchase-related costs | 52.3% |
| Mortgages with 90% or 100% financing | 43.0% |
| Reinstate tax incentives for primary residence purchase | 40.0% |
| Rent-to-own | 30.2% |
| Increase the stock of protected housing | 25.3% |
Source: II UCI Observatory
Concerns When Buying
The same study also reflects the major concerns Spanish buyers have when purchasing a home. For nearly 70% of respondents, price is the main issue when deciding to acquire a property, followed by location (51.7%) and affordability with their salary (46.5%).
Other concerns mentioned include the possibility of finding housing financing (34.5%) or job stability (33.3%). Less weight is given to other aspects like inflation (29.8%) or climate change (9.2%).
Concerns of Spaniards When Buying a Home
| Concern | Percentage |
|---|---|
| Housing prices | 69.6% |
| Location suitable for my needs | 51.7% |
| Affording the home with my salary | 46.5% |
| Interest rates | 41.2% |
| Finding housing financing | 34.5% |
| Job stability | 33.3% |
| Inflation | 29.8% |
| Climate change | 9.2% |
Source: II UCI Observatory
Lorena A. Zenklussen, Commercial Director of Mortgage Financing at UCI, states that “the scarcity of stock, both new and second-hand, along with the lack of land for construction, coupled with the recovery of demand in the first half of the year, are driving prices up, making it difficult for many families to find housing, especially in high-demand areas like major cities.” She insists that “effective public policies are needed to address the housing challenges and ensure that all Spaniards can access homeownership.”
This is the Average Salary Needed to Buy a Home in Spain
High demand and a lack of supply cause housing prices to keep rising, so the average salary of a potential homeowner has to be very high. The real estate market is experiencing significant changes regarding home purchases. Major cities remain the most affected, with prices exceeding the expectations of many potential buyers. It’s an investment that will depend on many factors, such as the city and area, whether it’s new construction, interest rates, or mortgages, among others.
As noted by iAhorro, the mortgage comparison site, the very high average housing price and the reduced supply of homes relative to demand are the two most important factors that make a city considered as stressed. The market is in a constant dilemma with rising property prices, growing demand, and an offer that does not match the number of demands, especially in major cities.
Salaries are an Obstacle
In addition to all the aforementioned factors, salaries also hinder citizens’ access to homeownership, especially in major cities. Simone Colombelli, spokesperson for iAhorro, states that although the average salary in Spain has been reformed, it is still insufficient to cope with the high property prices and rising interest rates.
The latest data published by the National Statistics Institute, corresponding to the year 2022, shows that the average gross monthly salary for a person in Spain working full-time is 2,341.35 euros. After deductions for IRPF and social security, this salary would be approximately 1,830 euros net per month.
This varies by region, with the Basque Country recording the highest salary at 3,837.42 euros gross per month and 2,200 euros net. Second is the Community of Madrid, with a net salary of 2,050 euros, and Catalonia, with a net salary of around 1,930 euros per month. But these are not enough for an individual to afford a home. To handle this expense, a salary of 5,909 euros is needed because the Bank of Spain does not allow investing more than 35% of the net monthly salary.
Most Stressed Cities
According to a study by iAhorro in the first half of 2024, San Sebastián is the most stressed city and provincial capital in Spain, where the average price of a 100 m² home is 551,200 euros. It is followed by Madrid, with a price of 438,500 euros, where the bank offers an interest rate of 2.9%, and a mortgage payment of 1,645 euros per month, so the owner’s salary would need to be 4,701 euros net per month. In third place is Barcelona, where a house costs around 349,520 euros, making the monthly mortgage payment 1,639 euros, and requiring an income of 4,684 euros net.
Young People Intend to Buy a Home Within Five Years
20% of Spaniards plan to buy a home in the next five years. However, the difficulty in saving the necessary amount for the down payment and the costs associated with purchasing remains a significant barrier, especially for young people.
The cities where it is more affordable to buy a home, and where the average salary would suffice, are Zamora, where the average price of a 100 m² home is 115,200 euros, so the monthly mortgage payment of 432 euros would require a salary of 1,235 euros. In Cartagena, a salary of 1,249 euros is enough for a home costing 116,500 euros, and in Jaén, the mortgage would be 441 euros for a home costing 117,800 euros, requiring a salary of 1,260 euros.
Sitges: The Most Expensive Municipality in the Province of Barcelona
Barcelona is one of the Spanish cities with the most expensive rental and purchase prices. However, the province encompasses more than a dozen regions, each with its own prices. Some are well above the average and rank as the most expensive municipalities to live in.
A notable example is Sitges, a coastal town in the Garraf region, known for being a major tourist attraction and one of the best places in Catalonia to retire. Purchasing a property in this town requires an average expenditure of 705,081 euros. According to Idealista, in June 2024, the price per square meter in Sitges is 4,552 euros. Therefore, buying a 90 square meter apartment exceeds 400,000 euros.
Sitges has become a coveted yet inaccessible option for many, standing out as a symbol of the challenge of accessing housing in certain high-demand areas in Spain.
At Living Sitges Inmobiliaria, we understand the importance of finding sustainable and effective solutions for our clients, facilitating access to luxury homes in prime locations like Sitges. We remain attentive to market trends and policies that may influence housing access, always providing the best service and advice to our clients.