In the coming years, families in Spain and Portugal can expect a slight increase in their income, but this nominal increase will not significantly alleviate the problem of access to affordable housing. Fitch’s latest analysis of the Spanish and Portuguese real estate market predicts that these problems will persist, as family incomes will continue to rise at a similar rate to the increase in house prices. According to Fitch, this ratio is almost eight times higher “in large metropolitan areas”.
The study also highlights similar situations in both countries, with Portugal experiencing a deterioration of affordability in recent times. On average, the ratio between house prices and average household income is six times higher in Portugal compared to Spain. The authors emphasize that affordable housing is a key social concern for both countries, particularly for young families and first-time buyers with limited savings. They note that despite these challenges, there have been measures implemented in both countries to address them. For example, in Spain there are guarantees for first-time homebuyers under 35 years old.
Unlike other European countries where house prices have been falling during recent quarters, Spain and Portugal have seen their prices continue to rise. Fitch predicts that this trend will continue at a moderate pace over the next two years due to persistent supply limitations and vulnerabilities in demand. However, despite these challenges, there are still many potential buyers for homes on the market. Last year alone saw 15% of sales made by foreigners. “We expect this trend to continue reflecting the attractiveness of Portugal and Spain for some groups,” says Fitch analysts.
Fitch believes that foreign purchases are helping maintain some level of activity in the real estate market despite declining compared to high levels seen earlier this year due to supply chain disruptions caused by Covid-19 outbreaks worldwide.
According to Fitch’s analysis of mortgage lending trends, it is expected that bank lending for residential properties will recover from its low point last year by 2024-2025 after suffering from an unexpected decline due to economic uncertainties caused by global events such as trade tensions and geopolitical instability.
However, while these developments may bring some relief from mortgage delinquencies which have increased significantly over the past year across both countries due to rising interest rates and falling wages.
