Is it possible for the price of housing to be equated with salaries?

20/09/2018

Having access to the purchase of a home is closely linked to the wage condition of households. A disproportionate growth in the price of real estate and a stagnation in salaries would produce a complicated situation. According to Adecco, the average annual salary was 19,752 euros in the second quarter of 2018. Also, the price of housing closed in this same period at 1,596 euros per square meter, according to flats.com. Thus, the effort of Spanish households for the full payment of a home would be 7.2 years of salary.

Adecco maintains that the average salary in Spain cuts its purchasing power by 469 euros per year since 2016. Only two regions improved their situation compared to two years ago: Asturias, with 199 euros per year more than in mid-2016; and Navarre, with 20 euros per year more. As for salary, Madrid is the autonomy that enjoys greater remuneration, with an average of 1,945 euros per month. To the question about the possibility that the price of housing is equated with salaries, there are different theories and scenarios that may or may not allow such a situation.

Work to become an owner
Regarding the annual effort in number of salaries that a family must invest to buy a home in Spain, there is an official data provided by the Bank of Spain. According to the issuing institute, this indicator closed the first quarter of 2018 with 7.2 years. This figure reached record highs in 2007, in full boom of the housing bubble, with an effort of 8.8 years. The evolution of this index has been 'in crescendo' in recent years.

Another organization that calculates the relationship between wages and the price of housing is the Appraisal Society, which estimates that there are differences in the different regions of our country. "The Balearic Islands is the autonomous community where the index of real estate effort is highest (15.6 years) while the one that requires less effort is Murcia, with 5 years", explains César Hernández, director of Market Research for the appraiser, in based on the data for the first quarter of 2018.

Looking to other countries
González affirms that, "we should not believe that Spain is the country where more years are needed to pay a full house, but it is something that we can see in many countries around us". Specifically, in a ranking contributed by Kelisto.es in which 39 European countries are analyzed, Spain occupies the 31st position in a list headed by Serbia, where 18.3 years of salary are needed for the payment of a house. Serbia is followed by Ukraine (15.29 years), Belarus (14.94 years) and Albania (14.5 years).

On the contrary, this ranking points to Iceland (6.63 years), Denmark (7.09 years) and Belgium (7.29 years) as the countries in which fewer years are needed for the payment of a property. In Iceland, for example, the average monthly salary is 2,822 euros and buying a house in the center of the city is around 4,267 euros per square meter. These differences highlight the importance of job stability and its close relationship with the price of housing. Those countries where good working conditions are not encouraged will be the most difficult to have access to the purchase of a home.