Real Estate Wealth: Spain’s Housing Value Surge

Real Estate Wealth: Spain's Housing Value Surge


Explore how rising housing values are enhancing real estate wealth for Spanish households, as highlighted by the Bank of Spain’s latest findings.

The revaluation of housing assets has emerged as a significant factor in augmenting the wealth of property owners, as elucidated by the Bank of Spain. The Distributive Accounts of Household Wealth reveal a striking trend: Spanish households, in contrast to their counterparts in the euro area, allocate a disproportionately larger segment of their gross wealth to real estate assets. This phenomenon is observed across various strata of wealth, underscoring the pivotal role that housing plays in the financial landscape of families.

According to the recent report on the financial situation of households and companies, published by the Bank of Spain, the ongoing appreciation of housing values has continued to enhance the wealth of existing homeowners. However, this upward trajectory in property values has simultaneously exacerbated the challenges faced by prospective buyers seeking access to the housing market.

The report indicates that while the increase in house prices has contributed to a decline in housing accessibility, a notable shift occurred in the fourth quarter of 2023. During this period, the adverse effects of rising prices were more than counterbalanced by the robust growth in per capita income and a decrease in financing costs. Consequently, there was a modest improvement—approximately 6.6 points year-on-year—observed in the indicators measuring the accessibility of homeownership through mortgage financing. Nonetheless, it is essential to acknowledge that much of the tightening experienced during the 2022-2023 period remains entrenched.

In a comparative analysis with the euro area, the interplay of rising per capita income and reduced financing costs yielded a less pronounced enhancement in accessibility conditions, with improvements of 7 points in the eurozone versus 12.2 points in Spain. Furthermore, the relative stagnation of house prices in the Eurozone since 2022 has mitigated the cumulative deterioration of the affordability index, which stands at 19.2 points in the Economic and Monetary Union (EMU) compared to a more pronounced 25.3 points in Spain.

Simultaneously, gross disposable income in real terms per household has surpassed pre-pandemic levels, registering a 5.4% increase above the average of 2019 by the third quarter of 2024. Data from the agency led by José Luis Escrivá indicates that household income experienced a year-on-year growth rate of 8.2% in the same quarter, albeit reflecting a moderation of eight-tenths compared to the previous quarter. In real terms, income maintained a growth trajectory of 4.2%.

The deceleration in nominal gross disposable income can be primarily attributed to a slowdown in property income growth, while the contribution of employee remuneration to overall income growth has risen by 0.7 points, reaching a total of 6 points. This increase is largely a result of employment growth, which has effectively counterbalanced the moderation in remuneration per employee.

Interestingly, the savings rate has seen a slight uptick, remaining at historically elevated levels. By the third quarter of 2024, household savings as a proportion of gross disposable income increased by 1.1 percentage points, reaching 14.2%.

The report further highlights that since 2015, Spanish households have exhibited a relatively favorable aggregate financial situation when juxtaposed with the average for the period spanning 2005 to 2024. This positive trajectory is primarily attributed to a sustained process of de-indebtedness, complemented by historically low financing costs until 2022, alongside improvements in the labor market—albeit with the notable exception of the most acute phase of the pandemic in 2020.

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