Mortgage Sucks 39% of Spanish Family Income

According to a recent real estate analysis carried out by Deloitte, Spanish households spend 39.4% of their income on mortgage payments, despite the fall in house prices in recent years. A fact that explains why the ‘stock’ of unsold new homes is not being absorbed at the speed desired by the domestic property sector.

The average effort needed by households to pay the mortgage is higher than estimated by the Bank of Spain even after allowing for deductions in the first quarter of 2012, of 36.2%, and is above that recommended by the current State Housing and Rehabilitation Plan, of 33.3%.

Despite this fact, Deloitte says that the ‘stock’ of housing, which the Ministry of Development puts at 680,000, has remained “fairly stable” over the last year. In addition, they specify that most of these properties are located in Barcelona (60,000), Madrid (51,000) and in the main Levante provinces, which collectively account for around 150,700 homes and where the assets have less exposure to the market.

The report states, published El Mundo, that the ratio of unsold new homes per 1,000 inhabitants, which stood at a national average of 17 properties, has started to decline in 37 Spanish provinces. The most significant decreases from last year are those in Álava (-38%), Cantabria (-27%) and Navarra (-19%).

According to the study, the provinces that have most ‘stock’ for every 1,000 inhabitants are Castellón (76 homes), Toledo (38) and Almeria (34). On the other side, the provinces with the lowest proportion of unsold homes per 1,000 inhabitants are Badajoz (2.9), Cáceres (3.9) and Vizcaya (4.1).

The market will recover sooner in northern Spain

The Deloitte report says, however, that six northern Spanish provinces – Álava, Cantabria, La Coruna, Guipúzcoa, Navarra and Vizcaya – in addition to Madrid, are in a better position from which to recover their real estate activity, taking into account both their macroeconomic situation as well as their real estate fundamentals.

In addition, they say that another group of 22 provinces, which includes Asturias, Barcelona and Zaragoza, who do not present such a favourable situation, would be able to normalise their activity, but at a slower rate. Finally, they say that a third group of 21 provinces would need more time to absorb the existing ‘stock’ and boost the confidence of the local real estate sector.