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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.
This great tool lets you compare asking prices to average incomes by region.
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I haven’t understood the relationship between income and house prices for years now, especially the last three, either in the UK or Spain.
Taking an average income of 30K against an average house at 300K, how can that possibly work? Even with practically zero interest rates, you can’t repay something you’ve bought at ten times income, not even over 40 years.
The bubble burst in 2007, as it was bound to, governments took the interest rates down to zero, as they had to, but it still doesn’t work.
Price falls are guaranteed to try and square the equation, but the bottom is dictated by an easy measurement: affordability (income). The banks can bankrupt as many people as they have to, until they themselves become bankrupt. What then? Bankrupt governments?
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@Rocker wrote:
I haven’t understood the relationship between income and house prices for years now, especially the last three, either in the UK or Spain.
Taking an average income of 30K against an average house at 300K, how can that possibly work? Even with practically zero interest rates, you can’t repay something you’ve bought at ten times income, not even over 40 years.
The bubble burst in 2007, as it was bound to, governments took the interest rates down to zero, as they had to, but it still doesn’t work.
Price falls are guaranteed to try and square the equation, but the bottom is dictated by an easy measurement: affordability (income). The banks can bankrupt as many people as they have to, until they themselves become bankrupt. What then? Bankrupt governments?
Id like to see this earnings/mortgage ratio restored to more affordable levels. For one, we cant keep interest rates at near zero forever, but also, who really wants such a huge amount of debt for just for a house. Youd think that having somewhere to live would be a pretty basic requirement in this day an age, yet so many people are priced out that its now just a pipe dream for many.
Weve allowed houses to become a vehicle for some major financial speculation, which I think was quite foolish given the basic human need for shelter.
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