Of the messages offered yesterday by the Bank of Spain on housing, one word stands out: “problem”. Access to this scarce good has become precisely that, a “problem of magnitude”, capable of affecting economic growth if it is not stopped in time, assured the general director of Economics and Statistics of the Bank of Spain, Ángel Gavilán, during the presentation of the chapter dedicated to housing in the institution’s annual report.
Spain, the report assures, will accumulate a deficit of 600,000 homes at the end of next year. The reason is that the construction rate, of 90,000 per year, is much lower than the creation of new homes. It is counterintuitive at a time of low birthrates, but there are more and more households due to immigration and the average family size is shrinking. They also tend to concentrate in areas where there is a higher tension in the housing market.
The Spanish Government’s plans to build 184,000 affordable homes shrink compared to the figures offered yesterday by the Bank of Spain. Gavilán believes that, just to solve the problem associated with the creation of new homes, it would be necessary to build 1.5 million homes in ten years. “It’s a problem that has been accumulating in recent decades,” he said.
Housing needs are concentrated in five provinces: Madrid, Barcelona, ??Valencia, Malaga and Alicante. Between 2022 and 2023, a deficit of 365,000 units has been generated, to which an additional 225,000 will be added for the years 2024 and 2025.
The creation of new homes is experiencing its particular boom. If in 2015 there were 50,000, in 2022 and 2023 the figures will have been an average of 275,000 per year. The forecast is that this pace will continue and at least 1.2 million will be created in ten years.
The strong decompensation of the market partly explains that prices have continued to rise in 2023 despite interest rate hikes. The report does not offer predictions about what will happen in the future, but it does put the appreciation at 56% since 2014. The current level is now 2% below the level of 2007, when housing reached at its all-time high.
However, it doesn’t have to be all about laying bricks. There are two elements that can work in favor of the solution. One consists of giving way to the nearly 450,000 new homes that remain without a buyer after the 2008 crisis, and another, to inhabit the nearly 400,000 empty homes in urban areas. It’s an 850,000-unit holdback that could alleviate some of the problem.
The housing that is built could satisfy, according to the Bank of Spain’s calculations, 40% of the new demand. This percentage varies greatly by region and, in the case of Catalonia and the Valencian Community, it would be between 25% and 30%.
The report also puts the housing stock in Spain at 27 million, of which 19.3 million are main homes and another 7.5 million, a mix of second residences, unoccupied, tourist and seasonal rentals.
To put the empty homes on the market, Gavilán proposes measures such as rehabilitation, the development of rental insurance that gives confidence to the owners and, thirdly, “some mechanism for their transfer to the public administration through concession for them to manage the rent”.
The Bank of Spain report also analyzes the rental market and concludes that price controls “can generate unwanted effects”. The limitations on tourist flats, he warns, have not raised the conventional rent, but the seasonal one.
The economic gap between owners and renters is growing. Buy-to-let offers a return of 10.5%, much higher than the Ibex or public debt, the report indicates. Added to this is a “favorable tax treatment”.
Meanwhile, people who live in rented accommodation in Spain make a far greater overexertion than in other European countries. 40% are in vulnerable conditions.
The Bank of Spain is also in favor of changing housing taxation to improve the supply, especially of empty houses. His proposal consists of raising the IBI and lowering the taxes associated with the acquisition, although he recognizes that “it would not have immediate effects” and could even, at first, raise prices.
