In Madrid, Barcelona, and Málaga, the theoretical effort exceeds 45%. The national average stood at 30.9% at the end of 2022

Autors: Mónica G. Morenohors: Lorena Torío / 

The rise in prices, the increased cost of mortgages, and the loss of purchasing power are making access to housing even more difficult. The latest data from the Tinsa IMIE Local Markets report places the theoretical annual effort to buy a home at 30.9% at the end of the last quarter of 2022, which is five-tenths higher than in the previous three months.

This indicator is calculated based on the disposable income a typical family uses to pay the first mortgage installment covering 80% of the house’s value. The appraiser considers accessibility to be “reasonable” when it is below 35% and “critical” if it exceeds 45%.

The situation is particularly challenging for families buying a home in Barcelona, Madrid, and Málaga, where more than 40% of their disposable income is allocated to mortgage payments. Specifically, in Barcelona, the theoretical annual effort reached 45.5%, in Madrid 43.5%, and in Málaga 40.7%. Seville came in fourth at 36.6%, also exceeding the reasonable threshold. In all these cities, the indicator increased compared to the previous year and intensified compared to their respective provinces, showing clear pressure.

“The most pressing issue is focused on the two major cities, Madrid and Barcelona, and the coastal city of Málaga. These are hubs of demand due to the dynamism of their labor markets and investment. The growing influence of urban tourism, coastal tourism, and second residences attracts investment demand and higher external rents, making it difficult for local households to access housing,” the report states.

Regarding housing prices, the square meter reached an average of 3,583 euros in Madrid at the end of 2022, making it the city with prices closest to the peaks reached during the real estate bubble. Specifically, it is only -11.2% from the figures reached in 2007. Málaga (-14.8%) and Barcelona (-17.2%) are also close, with prices at 2,065 and 3,591 euros/m², respectively.

“The capital with the highest price growth in the last two years has been Madrid, while Barcelona has shown more modest growth. In Málaga, Seville, Zaragoza, and Valencia, the average prices have increased continuously,” explains Andrea de la Hoz from Tinsa’s Research Service.

Districts Exceeding 50%

In the district-level analysis, Tinsa’s report confirms that many areas of the major cities surpass the local average. The highest purchase effort in the country is in the Barcelona district of Ciutat Vella (62.6%), where the square meter costs 3,733 euros. It is noteworthy that all districts in Barcelona, except Sarrià-San Gervasi, exceeded the recommended threshold for buying a home by the end of the year. Sant Martí, Gracia, L’Eixample, Sants Montjuïc, Les Corts, and San Andreu were all above 45%.

The situation is similar in Madrid and Málaga. In Madrid, the Centro and Arganzuela districts and the Teatinos-Universidad district in Málaga exceeded 50%. Districts in Madrid like Tetuán (47.5%), Chamberí (46.3%), and Retiro (45.6%) are around the 45% mark.

Although with some relief compared to the previous cities, the accessibility for purchasing a first home in Seville also exceeds 35%. At the end of the fourth quarter of 2022, the price of new and used homes in Seville reached 2,029 euros/m². Sevillians allocate an average of 36.6% of their disposable income to the first annual mortgage payment—1.2 percentage points higher than in the third quarter of 2022.

Expanding the view to the districts, in three of them, the theoretical annual effort exceeds the city’s average. In fact, in two districts, the situation is “critical.” These are Triana and Casco Antiguo, where the percentage of disposable income a typical household must allocate is 43.6% and 42.3%, respectively, while in Nervión it is 36.9%. Conversely, Cerro-Amate (28%) and Este-Alcosa-Torreblanca (31.1%) are the areas with the lowest theoretical annual effort.

Reasonable Accessibility

There are two major markets within reasonable accessibility: Valencia and Zaragoza. “The lower housing prices, more aligned with household disposable incomes, allow for more sustainable effort rates and avoid potential economic strain on families,” says Tinsa’s Research Service.

In Valencia, the effort—the ratio between housing cost and household disposable income—is 31.4%, up from 30.6% in the previous year. Only the Valencia districts of Quatre Carreres (33.6%), Campanar (33%), Poblats Marítims (31.8%), and Ciutat Vella (31.7%) are above this level, though none show accessibility problems, according to Tinsa’s figures. The most expensive area in Valencia is Ciutat Vella, where the average price per square meter is 2,616 euros, reflecting a year-over-year increase of 4.3%.

According to the appraiser’s data, the city that has seen the highest increase in the price of new and used homes is Zaragoza. Over the past twelve months, homes have become 10.9% more expensive in the city, reaching 1,655 euros/m². Among the major real estate markets in the country, Zaragoza has the lowest theoretical annual effort for families, at 29.2%. However, this percentage has increased by 1.5 percentage points compared to the 27.7% recorded in the third quarter of the previous year.

The situation in the districts is similar to the city average. Only two districts—La Almozara (30%) and Margen Izquierda (29.5%)—have a higher theoretical effort, though still below the red line. On the other hand, the districts with the least strained housing access are Barrios Rurales Oeste (18.7%), Barrios Rurales Norte (22.6%), and Oliver-Valdefierro (23.6%).

Provinces

Most provinces across the country report a moderate effort level, meaning below 35%. Only three provinces have higher rates. Leading the list is the Balearic Islands, where households need to allocate 53% of their disposable income to the first year of mortgage payments. In this province, the price of housing has risen to 2,682 euros/m² by the end of last year.

The recent increases make the Balearic Islands the province closest to reaching the peaks of the real estate bubble. Only 1.9% separates the current price from the 2,734 euros/m² reached in the third quarter of 2008.

Following are Málaga and Madrid with theoretical annual efforts of 42.1% and 37.8%, respectively. These are “provinces with high demand dynamics and more intense residential price and space pressures,” according to Tinsa’s report. Next are Barcelona (34.9%), Cádiz (32.6%), and Navarra (32.4%). On the other hand, provinces with less strained housing access and lower market dynamics are Lleida (17.4%), Teruel (19.2%), and Ciudad Real (19.8%).