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Why are young people unable to access home ownership?

Guzmán Antonio Muñoz Fernández, Universidad de Córdoba; Adaptation: Àlex Blancafort
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Precarious employment and low wages are preventing a large number of Spain’s young people from accessing home ownership. They have neither capacity to pay the initial down-payment, nor stable employment to enable them to afford mortgage payments. Renting a property – often shared due to high prices – or remaining in the family home are the only alternatives for many of them. This tendency, which started to emerge in 2008, is growing year upon year.
Key points
  • 1
       Since the start of the economic crisis, there has been an accelerated decline in the number of young homeowners: today barely 26% of people aged under 29 years are owner-occupiers, versus 54% in 2008.
  • 2
       To access home ownership, many young people have to or would have to allocate over 60% of their monthly income to making mortgage repayments.
  • 3
       Some 48.9% of young people aged under 29 years were renting their homes in 2017, versus 32.3% in 2008. The greatest price increases in the property market are being recorded in rentals.
  • 4
       An emerging force is the free occupancy formula. Family members who own more than one property offer one of them free of charge to enable young relatives to leave home.
What possibilities do young people have of purchasing a home?
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The standards used by the banks themselves recommend that no more than 30%-35% of monthly income be allocated to paying the mortgage. However, at present, the percentage of net salary for a single-person household that might be reserved to cover the cost of the first mortgage instalment for a free-market home can exceed 60%. For this reason, a young person can only buy a home with great difficulty.

Looking at population data (averages for young people in Spain), the average annual salary for a person aged 16 to 29 years is 11,161 euros. With a 30-year mortgage and an interest rate of 2.35%, assigning the recommended 30% of net salary to paying the loan means that a single person could purchase a home worth 78,289 euros, and a young household with two salaries a home worth 143,595 euros. However, although it depends on where the house is being sought, the average price of a home in Spain is around 175,000 euros.

For the majority of young people, the initial down-payment on the property purchase and the guarantees that need to be provided for mortgages are also a problem. Thus, the initial layout rises to 45,366 euros on average, calculated based on the estimate of a down-payment of 20% of the property value and an additional 10% for buying costs. This amount represents 2.2 times the total annual income of a young household that has at least two incoming wages.

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