SHARE
COPY LINK

PROPERTY

Rent prices in Spain rising 30 times faster than wages

Salaries in Spain have only increased by 1.6 percent since 2013, whereas rent prices have shot up by 50 percent.

Rent prices in Spain rising 30 times faster than wages
Palma de Mallorca is the Spanish city where rent prices have increased the most. Photo: James Stringer/Flickr

Recent reports by the Bank of Spain and the country’s National Statistics Agency (INE) have shed light on the increasing cost of living in the country, in particularly Spain’s wild rent hikes. 

Whereas Spaniards earn only 1.6 percent more in wages than they did five years ago (€23,646 a year on average in 2018) they’re paying twice as much in rent than they did in 2013.

That has obviously spelled bad news for many tenants in Spain, 42 percent of whom spend 40 percent of their monthly wages on rent (Eurostat figures).

The Bank of Spain has highlighted that it also tends to be families with fewer financial means who have to resort to renting in Spain.

Unemployment and low wages are among the leading causes preventing them from being able to take out a mortgage when buying a property, even though property prices in the past five years have increased at a far slower price than rents – 6.8 percent compared to 50 percent.

Unsurprisingly, unpaid rent is also the leading cause of evictions in Spain.

Spain’s skyrocketing rent prices may also explain why the country remains a nation of homeowners (80 percent according to Eurostat, the highest in Western Europe), a rate which includes young adults who live at home with their parents as they are unable to afford renting their own place.

What you need to know about Spain's new rental laws

Despite a royal decree approved last March which was aimed at putting a stop to the spiraling “alquileres”, Spanish estate agencies are warning that the lack of rental properties on offer is only serving to make the situation worse.

In which Spanish cities have rental prices gone up the most?

Majorca’s capital Palma and Barcelona have seen the sharpest rise in average rent prices, with homes in both cities now costing more than 50 percent more than five years ago.

They’re followed by the southern city of Malaga, the Spanish capital Madrid, Las Palmas de Gran Canaria and Valencia, all cities where properties are roughly 45 percent more expensive to rent than in 2013.

Santa Cruz de Tenerife in the Canary Islands has also seen a rise of 40 percent in rent prices in just five years.
 

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

SHOW COMMENTS