This great graphic from the financial website actibva.com illustrates how Spanish house prices have raced ahead of inflation, salaries, and other categories of products, at least in some areas.
An apartment on the Paseo Castellana in Madrid cost €31,553 in 1981, and now costs €1.2 million. Had it gone up in price at the rate of general consumer price inflation (CPI), it would now cost €136,120, which means the cost of ‘shelter’ on the Castellana has gone up at 10 times the rate of inflation.
Relative to other goods, then, housing costs have exploded, taking an ever-bigger bite out of incomes.
Admittedly, you have to be careful what conclusions you draw from an example that uses house prices on the Castellana – one of Spain’s most up-market streets (like Piccadilly in London). If you looked at national averages the difference would not be so great. Even so, it’s a neat way of making the point that the cost of shelter has gone up much more than other goods, some of which have even fallen in real terms (inflation adjusted).
The other examples in the graphic show that:
- Rents in Seville have gone up by around a factor of 7 (in nominal terms).
- Cars have gone up at a rate 4 times higher than inflation. A Seat that cost €595 in 1981 now costs €9,900, but should cost just €2,567 had it followed the CPI.
- The minimum wage has gone up with inflation – but no more! – from €154/month in 1981 to €641/month today. That means that house and car ownership take a significantly bigger bite out of salaries than they did 30 years ago.
- Prices for cured Spanish ham, pork, and milk have gone down in real terms, but bread and gin have gone up.