How many years of income do you need to buy a home in your neighborhood?

Access to housing is complicated for residents of large cities.

Thomas Osborne
Thomas Osborne
16 February 2023 Thursday 08:27
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How many years of income do you need to buy a home in your neighborhood?

Access to housing is complicated for residents of large cities. In various neighborhoods and districts of Barcelona and Madrid, the effort to purchase a home -understood as the years of full income required- is increasing, as shown by a study by the appraisal company UVE Valoraciones. They even double the state average and some are at all-time highs.

"In 2022, at the national level, the effort is at its lowest since 2005 with 6.32 years, but it does not adequately reflect reality and the situation is very heterogeneous," says Germán Pérez Barrios, president of UVE Valoraciones. Especially if you compare the big cities with those of the interior. Also if you live in areas where the presence of foreign buyers is more notable, either for investment or in tourist areas as a second residence, where the effort has skyrocketed from the lows of previous years.

To calculate the effort, the appraiser has taken the average price of the market value of the standard home, based on the cadastre data, and has compared it with the average income per inhabitant of each district, multiplied by the average number of occupants of a home. This is how family income has been achieved, which enters the account at the end of the month in homes.

By comparing them, the years of income necessary to buy a home in the neighborhood in which you reside based on the income and valuation of that area are achieved.

Looking at Barcelona, ​​Ciutat Vella, which with its 22,604 euros is the neighborhood with the least income, is also where the most years of income are required. They are 12.69, since the average house prices are at 286,781 euros. Although it is double the national average, the positive note is that it is down from 13.22 the previous year.

Behind them are Eixample, with 43,028 euros of rent and 10.11 years of effort (more than last year), and Sant Martí, with 34,836 euros of rent and 8.75 years of full income for a home. It is also going up.

Horta Guinardó (32,342 euros of income, 231,309 euros of market value and 7.15 years of effort) and Nou Barris (23,665 euros of income, average valuation of 174,700 euros and 7.38 years) are the most affordable based on the wages. In both cases, the necessary years are lower than the data for 2021.

The statistics date back to 2005. Taking the lowest data in which the effort of each neighborhood and the current one has been, it can be seen how Sant Andreu is where the purchase effort has grown the most since the minimum of 2013. It has done so by 48 .5%, up to the current 8.31 years, since the income is at 30,734 euros and the market value at 255,495 euros. Nou Barris follows with an increase of 39% from the minimum of 2014. In other words, two of the most humble neighborhoods is where the purchase effort is increasing the most.

In the case of Madrid, the neighborhood in which more years of full income is required to buy a home is Retiro, which has an average income of 53,949 euros per household and average market valuations of 581,327 euros. Thus, 10.78 years of full income are required for the purchase, an all-time high.

The district of Salamanca, with 9.25 years (income of 74,892 euros per year and prices of 693,046 euros) and that of Arganzuela and its 9.24 years (36,451 euros of annual income and 336,765 euros in prices) follow it. Both need more years than in 2021.

Where less effort is needed is in San Blas-Canillejas (5.36 years, with income of 37,155 euros and average valuations of 199,225 euros) and Moncloa-Aravaca (5.5 years, 77,861 euros of income and prices of 428,138 euros). In the first it is slightly reduced, while it grows in the second.

In the comparison of the last 18 years, where the effort grows the most is in Carabanchel, at 7 years and an average value of 179,647 euros. It is 54% more than the minimum effort registered in 2015. The current 5.8 of Usera (155,681 euros) continue, which exceeds the minimum of 2015 by 49%.

The place with the greatest effort does not coincide with the one with the lowest or highest income or with the highest valuations. "The main explanation is that in them a high percentage of buyers acquire housing with income that does not correspond to the locality or neighborhood. Like foreign investors, who pick up the relationship between income and prices," Pérez assesses. It is something that is seen in Retiro and Salamanca in Madrid, with the presence of Latin American investors, or in Ciutat Vella and Eixample in Barcelona, ​​with European buyers, he exemplifies. "They buy at high prices and unbalance the data, since they don't count in salaries," he continues. In none of the cases are they the ones with the highest income in the city.

The most notable imbalances occur in other points. Broadening the focus, where a resident needs more years of income to buy a home is in Santa Eulàlia del Riu (Eivissa) with 17.29 years, since the average household income is 25,330 euros and the average market value of the housing is 437,942 euros. Xàbia (Alicante) follows with 15.46 years and Marbella (Málaga) and 15.18. The first ten places are completed by Adeje (Tenerife, 14.73 years), San Bartolomé de Tirajana (Gran Canaria, 14.10), Calvià (Mallorca, 13.73), Arona (Tenerife, 13.09), Fuengirola (Málaga, 12.78), Eivissa (12.57) and Mijas (Málaga, 11.44).

Another way of looking at price pressure is to look back to 2005, which is where the study goes back. The difference between the year with the lowest effort and the current one reflects that the years needed to buy a home have grown more in Eivissa (62% over 2005), Santa Eulàlia del Riu (58% over 2008), Adeje (43% over 2008), Arteixo (A Coruña, 4.83 years, 38% over 2018) or Ciutadella (Menorca, 10.91 years, 36% over 2017). "For the most part they are municipalities with a high tourist component," it is stated.

On the opposite side are the localities where fewer years of effort are needed. They are Puertollano (Ciudad Real), with 2.47 years of income necessary to buy a home, Mieres (Asturias), with 2.87 years, Algemesí (Valencia), with 2.89 years, and Novelda (Alicante) with 2.98 years.

Although at first a notable impact of the pandemic on the housing sector was expected, "what has happened has surprised us, because prices even went up," says Pérez. The factor of housing as a long-term investment -in an environment of low rates- and the operations planned for 2020 and 2021 that closed in 2022 have kept demand and prices strong.

To this must now be added another difficulty, the impact of the rise in interest rates. They have made access to housing more expensive and difficult in general terms, which will force them to allocate more percentage of income to cover the mortgage payment.