Cost of housing falls steeply for average family, perhaps

The cost of housing has fallen steeply for the average Spanish family in recent months, according to new figures from the Association of Developers and Constructors of Spain (APCE). If true, this might help take some of the pressure of the property market, as fewer families default on their mortgage payments.

Thanks to the rapid decline in Euribor, coupled with falling house prices, the cost of housing has gone from 31.4% of gross household income in January, to 25.4% in March, calculates the APCE. Repayments on the average mortgage of 144,500 Euros have fallen from 855 to 693 Euros per month, leaving the average family more than 160 Euros a month better off.

For households with just one wage earner, the cost of housing has fallen from 49% to 39.7% of gross household income. For households with 2 earners, the cost has fallen from 24.5% to 19.8%.

Spanish property prices fell by 9.7% over 12 months to the end of March, according to Tinsa, one of Spain’s leading appraisal companies, whilst Euribor has fallen by close to 60% over the last year.

An improvement in housing affordability in Spain is good news for the Spanish property market, but does not mean that the crash is over. The glut of property, much of it the wrong type of property in the wrong area, will not clear up just because the housing affordability ratio has improved.

Furthermore, the APCE figures assume that banks are passing on lower Euribor rates to borrowers, which is often not the case. The APCE also has a vested interest in looking on the bright side, which might have some influence over the way it calculates its figures.