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Local Spain
30-05-2025
- Business
- Local Spain
Is there a property bubble in Spain and will it burst in 2025?
A real estate or property bubble occurs when there is a steep rise in housing prices, fuelled by demand and speculation. Typically, it means that housing prices have risen more than current wages and that they're selling for much more than they actually should be worth. What makes it a bubble is that at some point in the future it will burst, leading to a sudden drop in housing prices, usually when demand falls and supply increases. So, is there a property bubble currently happening in Spain? It's common knowledge that housing prices in Spain have skyrocketed over the past few years and that there is a housing crisis with many people unable to access affordable homes. Home sales continue to break records in a market with a huge supply deficit. This is causing the average house price in Spain to reach bubble levels, the Bank of Spain noted in its latest financial report this week. Property prices are overvalued by up to 8.5 percent, El Banco de España concluded. It's worth noting that the monetary authority for Spain has the power to limit the number of mortgages banks can offer as a means to slow down any potential real estate bubble. Spain's central bank has also estimated that Spain's housing shortage added up to approximately 450,000 homes. They also revealed that during the second half of 2024, 367,000 purchases were made, which indicates high demand. The trend continued into early 2025 with 183,140 sales registered between January and March 2025, according to data published by Spain's National Statistics Institute (INE). This is the greatest number of sales in the beginning of the year since 2007 when Spain was definitely experiencing a property bubble. In fact, just one year later the bubble did burst and prices began to fall. Real estate experts believe that the trend seen at the beginning of 2025 is due to the current financial environment and 'the rush effect'. This is where people think that they should buy quickly before housing prices rise even further. "Prices are rising very quickly and the market is very tight ," José García Montalvo, professor of economics at Pompeu Fabra University, told Spain's leading newspaper El País. "This leads many people to think that if they wait any longer, they won't be able to buy, so they make the decision under the pressure that if they don't buy now, they won't be able to afford it in six months', he adds. María Matos, Director of Research at Fotocasa, believes that "if this trend of more than 60,000 transactions per month continues, we could be facing the best year since 2007'. For many analysts, these signs suggest that Spain is already experiencing a property bubble. What the experts are unsure of, however, is when it will burst, in part because not all of them even agree that there is a property bubble in the first place. One of the reasons that some analysts rule it out is the fact that the price per square metre in major Spanish cities is higher than at the height of the previous property bubble 17 years ago. They believe that one of the reasons prices are higher now than before is that buyers' salaries or purchasing power are also much higher, so real estate assets aren't overvalued. Furthermore, they've concluded that household debt is not at alarming levels, as it was during the 2007 property bubble. Some indicate that rising prices can be better explained by a lack of supply, than by a spiral of speculative buying. The President of the Association of Real Estate Agents of Biscay, José Manuel González Robles, rules out any risk of a real estate bubble. 'There's no risk, none, for a simple reason: the 2008 bubble and the financial crisis, was generated because the banks cut off the financing tap. There was over-indebtedness, especially at the state level.... Now the overall situation is completely different,' he told Basque newspaper Deia. Debt levels are low, and savings levels are at an all-time high. González explained that during Spain's financial crisis, there was a surplus of new-build housing, which now "doesn't exist". "Nothing is being built; on the contrary, there is a need for housing, and on the other hand, banks, back then, didn't want to give loans," which is the opposite now. Overall, there seems to be consensus that Spain's current housing crisis is very different from that of 2008. There's strong demand for housing, but construction is at a minimum (70 percent than back then). On the other hand, loans for housing developments and mortgages are much more closely supervised, and Spain no longer has cajas de ahorro savings banks, which were at the centre of previous crisis. Therefore, although there is clearly a severe housing crisis and shortage, the rude health of Spain's banking sector currently lessens the chances of a property bubble happening in 2025.
Local Spain
24-04-2025
- Business
- Local Spain
People in Spain pay half of their wages on rent
A new report has revealed that people in Spain now spend almost half their gross income on rent, laying bare the severity of the rental market situation for local people. Last year saw a wave of protests to demand affordable housing across Spain, strongly linked to the rise in short-term tourist rental accommodation in Spain's major cities and tourist destinations. The trend has continued into this year, with a nationwide demonstration held simultaneously in Spanish 40 cities earlier in April. Spanish radio network Cadena Ser reports that in 2024 average rents rose five times more than average wages in the country. According to the ' Relationship between salaries and rental housing in 2024 ' report by property website Fotocasa, in 2024 renters in Spain on average spent 47 percent of their salary on paying the rent, 4 percent more than in 2023 and 9 percent more than in 2019. This figure was based on average salary data from the InfoJobs platform and average rental prices from Fotocasa's property index. It also showed that rents have risen by a significant 14 percent year-on-year, bringing the average price in December 2024 to €13.29/m2 per month. This means that, taking into account the average gross salary in Spain, which in 2024 was €27,060 (€2,255 gross per month in 12 payments), renters had to spend 47 percent of their salary for an 80 m/2 home. The percentage of tenants' salaries spent on housing has risen from 38 percent in 2019 to 47 percent today, far exceeding financial recommendations. This is 'a figure well above the 30 percent recommended by official bodies,' says María Matos, spokesperson for Fotocasa. 'Furthermore, the 4 percentage point increase in just one year shows a radical change in renting, which exacerbates the inaccessibility of housing and could lead to long-term housing insecurity,' she added. This is a problem across most of Spain, but is particularly acute in regions like Madrid, where tenants now have to spend 71 percent of their gross salary to pay their rent. In Catalonia the figure is 64 percent and in the Balearic Islands more than 60 percent, although there has been a small decrease in the last year. Looking at the Fotocasa data, on a provincial level the 10 provinces of Spain that spend most of their salary on rent for an 80 m/2 home are: Barcelona (71 percent of gross salary), Madrid (71 percent), Guipúzcoa (59 percent), Vizcaya (56 percent), Girona (55 percent), Valencia (53 percent), Málaga (49 percent), Seville (45 percent) and Alicante (43 percent). Residents in 70 percent of provinces across the country spend more than the recommended 30 percent of their salary on renting. Meanwhile, in the provinces of Zamora, León, Badajoz, Ávila, Córdoba, Albacete, Cáceres, Teruel, Ourense, Ciudad Real, Jaén, Guadalajara and Castellón, renters spend 30 percent or less.
