IS HOUSING EXPENSIVE IN SPAIN?

HOW REALLY EXPENSIVE HOUSING IS?

In a previous paper I analized the crude oil price evolution and the inflation rate. Prices with corrected inflation were plotted versus time showing a big increase from 2000 but reaching lower values than during the Iran Revolution.

In this paper I analyse housing cost increase in Spain.

I have taken the average house cost increase in Spain from 1976 till 2007 from MINISTERIO DE FOMENTO. The plot is represented on the left figure above.


The main conclusions are :
a) Two big growth steps between 1986 and 1991 and 1998 – 2007.
b) The average cost has grown 1900% from 1976 until 2007.

The question is : Is buying a house more difficult now than in 1990 for instance?

Bankers and right wing politicians will tell you that credit facilities have allowed many people access to a living place without precedents in the past and considering the price increase of their properties they are wealthier (Mr Zaplana has been heard saying this absurdity).

A more scientific and logical approach will lead to the following facts :

a) Although property prices have increased, so have the mortgages and monthly payments.
b) Getting a new place to live is even more expensive so its out of the question. If your flat increases 10 times the price from lets say 100000 € to 1M but you have to pay 2 M € instead of 200000 € for the hosue of your dreams, are you going to earn 1M or is the finantial institution to give you a 1M € loan?
c) Finantial institutions no longer give big loans. There is neither liquidity in the market nor will to lend money unless garanties are provided...


For those loving inflation I plot the graph with corrected inflation (right above). It seems that housing has increased just 2,2 times once inflation ins considered. Good news... really?

Is Mr Zaplana and all these right wing politicians right after all?

To be followed

Jordi Delcor PhD.