3 years after the Spanish property bubble burst, a decent-sized home is still beyond the reach of the average Spanish family with one wage-earner.
How big a home can the average Spanish family afford to buy given house prices and incomes using the classic rule-of-thumb of spending no more than one third of your after-tax income on housing (rent of mortgage)?
Just 45 m2 is the answer, using an online calculator at the news site lainformacion.com showing the cost of housing relative to incomes in different parts of Spain.
It’s an interesting tool worth playing around to get a feel for Spanish house prices in relation to incomes. At a glance you can see where the biggest problems are by region.
How much can a one-salary household with the average Spanish wage of around 22,000 Euros paying a mortgage interest rate of 3.77% (the average currently being charged by lenders in Spain) afford to pay every month on a mortgage? Just 570 €/month, which buys you an average of just 45m2 based on the latest asking prices in €/m2 published by the property portal idealista.com.
How much would you have to earn to afford a home of 90m2 that would suit a family with a couple of children? Around €34,000 in Andalucia, €38,000 in The Valencian Region, and €47,000 in Catalonia. In other words, far more than your average Spaniard can afford.
Note that the calculator uses asking prices, which are likely to be significantly higher than transaction prices, so it over-states the problem. But even so its main point – that house prices are still too high given incomes and mortgage rates in Spain today – is bound to be true, at least as far as main homes go.
Holiday homes are another story. You don’t learn as much by comparing them to average Spanish incomes. They require a different analysis (which I’m working on).