Rising Incomes, Unaffordable Housing: Fitch’s Analysis of the Mortgage Market in Spain and Portugal”.

In the years 2024 and 2025, Spanish households are expected to see an increase in their incomes, but this nominal increase will not alleviate the access to housing problems faced by many families. According to Fitch’s recent analysis of the mortgage market, these problems will persist because family incomes will be similar to the evolution of housing prices.

Fitch estimates that on average, house prices in Spain will continue to multiply average household income by 5.5, a way to measure affordability. The agency warns that this ratio is almost eight times higher “in the principal metropolitan areas”. The situation in Portugal is very similar, with a ratio of six times between house prices and household income.

Unlike other European countries where house prices have been decreasing, in Spain and Portugal, they have continued to increase last year. This is due to persistent supply limitations in the housing market, which outweigh demand vulnerabilities. Fitch notes that foreign purchases are helping to maintain a certain level of transactions in the real estate market, although it also mentions secondary effects such as price bubbles in some areas.

Fitch expects that the bank’s residential credit offer will recover in the next few years after a decline in 2023. However, according to its report, delays in payments are expected to increase both countries this year. Despite this, many households have opted for mixed mortgages as a strategy to protect themselves against rising interest rates on variable loans. These represented almost 40% of all mortgages granted in Spain last year.

In conclusion, despite rising house prices in Spain and Portugal, Fitch expects that the residential credit offer will recover soon. However, accessibility issues related to housing will persist but there are measures implemented by both countries aimed at mitigating these problems