Economy |  Access to housing hardens

Economy | Access to housing hardens

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More expensive, more expensive to finance if you want to buy and more burdensome if you only want to rent. The access to housing in Spainwhich has never been easy for families, has tightened in recent months due to increases in prices and interest rates: the increase of 0.5 points agreed by the European Central Bank, already widely discounted by the markets, is nothing more than a symbolic milestone that marks the definitive end of cheap mortgages. And the alternative to buying, renting, also requires more and more effort from Spanish households.

First, because prices in both cases are picking up significantly in recent months: according to the monthly reports prepared by the Idealista real estate portal, the rent has increased by 5.6% so far this yearwhile buying a house is now 2.5% more expensive that in December.

They are increases lower than inflation, but they bring prices per square meter closer to their historical maximums and raise the barrier that households must jump, especially young people, to get a home. Because, when those prices are put in relation to income, it is appreciated that it is increasingly difficult to open the doors of a house.

More expensive mortgages

If you intend to buy, the effort rate that households must assume is increasing relentlessly. The latest calculation by the Bank of Spain is that an average household must dedicate 34.3% of its disposable income to paying the mortgage during the first year, when before the pandemic it did not reach 31%.

The Bank of Spain itself recommends that the mortgage payment does not exceed 35% of income, so the rate is already close to the advisable limit. And as the interest rates continue to rise – the ECB is preparing another increase for September, probably another 50 basis points, and the Euribor, the main reference rate for mortgage loans, is already close to 1% – this effort will be greater.

“The impact of the rise in interest rates is going to be tremendous,” he says. Paloma Taltavull, Professor of Applied Economics at the University of Alicante and specialist in the real estate market“because it greatly raises the amount of monthly payments on new mortgages and makes accessibility much harder.”

Taltavull and his team elaborate an accessibility rate that differs methodologically from the one elaborated by the Bank of Spain -for example, it does not take into account the income of the household, but rather that of its main breadwinner-, but which shows a similar trend. For a 20-year mortgage loan, the percentage of income that goes to the installment during the first year stands at 35.2%, when at the end of 2019 it barely exceeded 30%and if the loan is extended to 30 years, it is reduced to 25.4%.

Entry barriers

Nevertheless, experts agree that the monthly mortgage payment is not the main problem, but the barriers that families must overcome to access this financing. Above all, a considerable prior savings: banks finance up to 80% of the value of the house, so it is necessary to have funds to pay the remaining 20% ​​and all the expenses associated with the sale and the loan, such as taxes, notary or home appraisal.

“Buying a home is something almost for the rich today,” he says. Joffre López, researcher at the Barcelona Municipal Housing Observatory and co-author of the six-monthly reports prepared by the Emancipation Observatory of the Spanish Youth Council. “Although mortgages have risen, we are not at the levels of 2007 or 2008. But people who need their first home usually have irregular incomes, do not have savings, and their main stumbling block is everything they ask of you before signing the mortgage, from guarantees to insurance. It is an endemic problem”.

Added to this is the fact that, since the bursting of the real estate bubble, financial entities are much more restrictive when granting loans. The result, as Paloma Taltavull points out, is a very restricted mortgage market, which “has not yet recovered from the collapse” of that crisis: in 2021, the best course in a decade, barely 418,000 mortgages worth 57,634 million euros were granted. euros, when in 2007 they were triple, with 1.2 million credits worth 184,427 million.

The consequence of all these difficulties is that many people are forced to live rented without wanting to. “The drift towards renting should be optional, due to a sociological change, but, in reality, a forced change towards renting is taking place,” he explains. Carolina Roca, president of the Association of Real Estate Developers of Madrid (ASPRIMA). “There is a small part that does respond to the fact that in Spain we had a rental decision deficit, but most of it is due to the impossibility of access to purchase, due to those barriers to entry.”

More effort to rent and to buy

And it is that, although the vital options of the families can lead them to prefer the rent, From a strictly economic point of view, the effort rate of renting is greater than that of buying.. The latest report from the Emancipation Observatory, as has already been seen, indicates that the cost of access to a home owned with mortgage financing for a young household -that is, that its members are between 16 and 29 years old- was in the first semester of 2021 of 26.4%, while the rent takes 42.2% of your income.

This effort, furthermore, is growing, as revealed by a report prepared in June of this year by the consultancy firm Ernst & Young for ASPRIMA, which compares what percentage of income had to be devoted to paying rent in 1997 and in 2020. Its conclusion is that , for a worker, the rate of effort had doubled in these two decades to account for more than two-thirds of his salary. And for a pensioner, an average rent already represents more than his entire income.

Despite being more burdensome, many families who cannot access mortgage financing have to rent, which leads them to compete in a market with “a scarce and expensive supply”, in the words of Joffre López, especially in the big capitals. Carolina Roca also points out that, while demand is increasing, Spain lacks “a real estate structure dedicated to renting in a professional manner, we were not prepared to absorb this increase, which causes tensions”.

In this sense, all the experts consulted agree that one of the underlying causes of the difficulty in getting a house is the lack of supply, both to rent and to buy. Taltavull points out that there has been a “brutal” decrease in the construction of houses during the last decade and Roca emphasizes that the construction of officially protected housing, which allows an affordable price, has practically come to a standstill in the last 12 years. “There is no supply of affordable housing, whether public or private”remarks Lopez.

A problem also for retirement

The shortage of supply is also appreciated when observing the sale of homes, which used to be divided almost 50% between new and used homes, now it is monopolized by used homes: so far this year, 81% of the operations are from second-hand houses and only the remaining 19% are new houses, which indicates a high real estate turnover despite the demand for housing.

The result of all this is that Spaniards have more and more difficulties in accessing a home and, when they do, they usually pay a high cost. The most affected are youthswho have the lowest rate of emancipation so far this century -less than 15% manage to become independent before the age of 30- and who must resort to formulas that do not always satisfy their needs, such as the shared rent.

Data from the National Institute of Statistics on the housing tenure regime reveals that, since 2012, young people under the age of 30 live mainly for rent, which is also gaining ground in the age group between 30 and 44 years, and even among the older layers of society. It is a trend that anticipates a problem in one or two decades, since home ownership is also a savings vehicle.

“It’s a vicious circle: in the rental market, young people cannot save, even more so when prices rise, and they will never be able to obtain that previous amount that allows them to buy,” says Paloma Taltavull. Y when they have to retire, their pension will hardly cover the rentas Carolina Roca warns: “Right now there is a vast majority of pensioners who do not have to allocate a single euro of their pension to housing. But when that rental cohort reaches retirement, they will not be able to pay it.”

#Economy #Access #housing #hardens

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