Housing affordability dramatically improved since bubble burst

Primary housing has become much more affordable since the Spanish property bubble burst, according to new figures from the Bank of Spain (BoS).

The cost of housing based on average mortgage payments calculated by the BoS has fallen from 42pc of gross household income at the peak of the boom to 27.5pc today – a glimmer of good news for hard-pressed Spanish families. As a result Spanish families have 15pc more income to spend on living expenses other than housing.

There is one problem though: this improvement includes the effect of mortgage tax relief, which was recently reíntroduced by the Government to stimulate the housing market. But since then the Government has been forced into a U-turn by the EU and announced that it will be eliminated from the beginning of next year. Once you strip out the effects of mortgage tax relief, housing affordability stands at 34.1pc, which is just a fraction over the 33pc maximum that experts recommend. In a housing market crash as big as the present one, you would expect affordability to fall into bargain territory, but that has not yet happened, according to official figures.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.