The Spanish property market has experienced significant growth with prices rising by 7.6% last year, according to registry data. However, rising prices are not accompanied by rising wages, meaning house prices are currently 7.1 times higher than the average household income, says a report by Banco de España, this could put a ceiling price on many properties across the country.
In 2007, at the height of the property boom, properties cost 9 times the average household income, a figure which fell to 6.3 in 2013. As the property recovery consolidates, prices have risen – so has the average amount of household income needed to finance a property purchase. This could present a problem as the level of wages and salaries have not shown any significant increases. Salaries will need to rise sharply if the ideal wage-to-property purchase ratio (4-5 times the average household income) is reached.
In the previous twelve months ending in the third quarter of 2017, property prices increased by 6.7%, compared to only a 1.43% increase in salaries.
Salaries need to be much higher than the national average in regions where property prices have raised the most. For example, in Malaga and the Balearic Islands households need to set aside 21% of its income to meet the first year mortgage repayments while in Madrid and Barcelona this figure rises to 23.8% and 25.8% respectively.