House prices stabilized in the second half of 2023 while rents continued to skyrocket

Housing prices and rents evolve at very different rates. While the cost of acquiring a second-hand home stabilized in the second half of 2023, rental income continued its particular climb with an increase of 5.45%. This is clear from a report on the housing market prepared by Tecnocasa and the Pompeu Fabra University (UPF), which confirms that renting is reaffirmed as the most expensive option both in the short and long term, despite its initial attractiveness in a context like the current one of high interest rates.

Regarding the second half of 2022, the price of used housing grew in Spain between July and December of last year by 1.69%, a slight growth that was far from the average annual inflation. The average square meter was paid in Spain in the second half of 2023 at 2,564 euros, an amount 36 euros higher than that recorded a year before. Despite the general trend, in some cities there were still significant increases in the price of second-hand housing. This is the case of Málaga, Seville, Valencia or Getafe, with increases in prices above 4%, compared to the decreases of between 0.5% and 0.72% registered in cities such as Madrid, Zaragoza and Valladolid.

In parallel, the average mortgage decreased by 2.01% in the final stretch of last year, falling to 117,788 euros. Specifically, the average monthly payment stood at 663 euros for variable rate loans and 551 euros for fixed mortgages, which have lost ground in recent semesters in favor especially of mixed mortgages.. This last option already represents 51% of firms, compared to 36% of loans at a fixed rate and 13% at a variable rate.

Faced with the stabilization in the price of second-hand homes, rents suffered a much more pronounced increase last year. They rose on average in the country as a whole by 5.45% in the second half of 2023, with significant increases in large cities such as Barcelona (9.7%), Madrid (7.82%), Seville (8.04%). and Valencia (7.84%). At the national level, the square meter was rented for 12.58 euros on average.

According to the report published this Tuesday, the delicate situation of the rental market is not only evident in the tension in rental levels, but also in the fact that supply has been reduced in recent years.. In fact, Tecnocasa data indicates that 21% of current sales correspond to homes that were previously rented. The rental offer of this real estate group has been reduced by 57% in the last three years. In 2015, houses looking for a tenant represented 14% of the portfolio, while in 2023 they barely reached 7.6%. “No matter what indicators you look at, the rental market is not doing well. The perspective is that the tension on rental prices will continue to increase. It is a pressure hole, where there is not enough supply,” says José García-Montalvo, director of the study and professor at UPF.

The most profitable option

Tecnocasa has accompanied the latest edition of its semiannual report with a study that compares the economic implications of renting or buying a home, both in the long and short term.. According to the results, paying a mortgage is always the most profitable option. “In the long term, buying a home is more interesting than renting in all of the populations studied,” explains the Director of Analysis of the Tecnocasa Group, Lázaro Cubero. Calculations indicate that, after 25 years paying the mortgage or rent, the purchase saves between 100,000 and 150,000 euros in more than 45% of the 670 municipalities analyzed.

“The purchase allows us to generate an asset value that grows each year, a fact that does not happen with the rental, since at the end of the period analyzed, the expense remains month after month,” adds Cubero.. The positive balance in favor of the buyer is even greater in Madrid and Barcelona, where it is between 200,000 euros and 250,000 euros.. In Bilbao, the savings when purchasing reaches between 250,000 and 300,000 euros, while in Valencia or Seville it is between 150,000 and 200,000 euros.

In the short term, the comparison is more variable, largely due to the current context of high interest rates, although the study once again opts for the purchase side. “We can highlight that, in the first year of purchase, the rental income is higher than the amount paid in interest in all towns,” notes Cubero, despite the increase in rates – which are currently close to 4% – has reduced the distance between mortgage payments and rents.

In fact, if the entire monthly payment is considered and not only what is paid in interest, only in 17.7% of the municipalities analyzed the mortgage payment was lower than the rental income in 2023, compared to 72.2%. % in which it was in 2021, when financial conditions were optimal and the average interest rate was around 1.5%. It must be taken into account that at the beginning of the life of the loan is when the most interest is paid.

However, the purchase option is not viable for everyone, since it requires a certain level of solvency. According to the Tecnocasa report, the main risk indicators remained stable in the second half of 2023, in line with the credit standards that banks have been applying in recent years.. Thus, mortgage loans covered on average 69% of the value of the home and the monthly payment was equivalent to 32% of the mortgagee's income on average. 83% of those newly mortgaged in the second half of 2023 had an indefinite employment contract and on average the repayment period did not exceed 28 years.