Wed. Apr 24th, 2019

The Bank of Spain warns that precariousness moves young people away from housing

El Banco de España alerta de que la precariedad aleja a los jóvenes de la vivienda



If something has changed crisis in the real estate sector is the rental market. Although Spain is still a country of owners, the proportion of households that opt ​​for this type of access to living place has not stopped increasing since the outbreak of housing bubble.

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According to Survey of life conditionsCurrently, 16.9% of households are rented. In 2008, this percentage only reached 14.2%. Although the trend is widespread throughout the population, the group between 16 and 29 years is more likely to rent, said yesterday the Bank of Spain in its Report Recent evolution of the housing market in Spain.






Operations

Purchases are 37% below the annual average recorded before the crisis

The entity chaired by Pablo Hernández de Cos identifies three reasons as motors of this change of trend: sociological, which have led to a change in preferences, fiscal and, above all, economic.

The rent has become for many the only option of access to housing due to the inability of large sectors to pay for a house. The Bank of Spain refers specifically to the "impact that the recession has had on labor market conditions, especially among young people."

The group between 20 and 24 years have seen their income plummet by 15% between 2008 and 2016. For those between 25 and 29 years, the loss was 9%. In addition, young people have been the most punished by unemployment. In 2013, the unemployment rate among workers aged 16 to 29 rose to 42.4%. One year later, in 2014, long-term unemployment reached 52.1% and temporary employment exceeded 57.4%. The Bank of Spain also recognizes that 2018 was a somewhat more benevolent year with these indicators, although they are still very high and a great barrier to entry to home ownership.






Disparities

In Madrid and Barcelona the purchase is increased by 49% and 39%, but in Castilla, only 8%

Taxation, especially the abolition on January 1, 2013 of the deduction for habitual residence, has also incentivized the rent.

All this meant "a significant increase in rental income in the most recent period," notes the Bank of Spain.

And it is that "while the purchase prices have not yet reached the level prior to the crisis, the rental prices are far above." Especially in the most stressed cities, such as Madrid and Barcelona, ​​although the last year points to a moderation.

Thus, the average rent price throughout 2018 increased by 9.3% compared to 18.4% that had risen the previous year, and "in cities such as Barcelona has even fallen", the report points out.

In the case of the sale, however, the recovery is still far from pre-crisis levels. In 2018, closed housing transactions totaled 550,000. It is 10% higher than in 2017 and the maximum level in five years, but 37% below the 885,000 registered annual average in the period 2004-2007.





In terms of prices, the trend in buying and selling is also bullish throughout the territory. But with very prominent differences between some areas and others. In Madrid and Catalonia, for example, prices have risen 49% and 39% respectively from the lowest point reached in the crisis. In contrast, in Extremadura and Castilla-La Mancha has barely registered an increase of 8%.

The adjustment between supply and demand is being "slow, but progressive," says the Bank of Spain. In 2018, a decade after the bubble burst, there were still 500,000 unsold homes in Spain. "This slow recovery of the stock could be reflecting, in addition, a certain mismatch between the characteristics of the defendant housing, among which would be the location, and the homes available for sale," the report states.

In the review that the Bank of Spain makes to the real estate sector, it also analyzes the effect of financing on recovery. "There has been an improvement in the financing conditions for loans for home purchases," he says.

The average interest rate has fallen from 3.1% in 2014 to 2.1% today. Mortgage repayment terms have been extended to 22 years for those signed at the end of 2018, compared to the average of 13 years at the beginning of 2014.





Even so, the outstanding credit balance has continued to contract because the volume of new operations has remained below the amount of the amortizations of the old loans.







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