A global but local phenomenon

A recent report from the Institute for Fiscal Studies shows that over the past 47 years, house prices around the world have grown 154% above the inflation rate. Which means an annual rate of 2%. Obviously, the discrepancy is large. From a cumulative growth of 656% in Luxembourg, to a decline of 46% in Colombia. In the same period, countries' incomes grew by 106%, and the annual growth rate of disposable personal income was 1.55%. This means that house prices rose by 0.45 percentage points per year above disposable income, which is understood financially as a risk premium for investing in housing assets but, from another point of view, implies a decline in access to housing. On a global scale. It is the dual aspect of housing, as a consumer good and as an investment good. Countries where house prices have risen by more than twice disposable income are Australia, Luxembourg and the Netherlands, and those where house prices have not risen by half disposable income are Japan, South Korea and Colombia. . One possible explanation for this global phenomenon is the dynamics of large European and American cities, where population growth and land shortages have put pressure on housing prices.

Spain is no exception, and housing prices have recorded growth of more than one percentage point per year above disposable income. In other words, every year that passes, it becomes 1% more difficult to get a home. In our case, an additional factor is added: wage stagnation, a product of the stagnation in the productivity of the Spanish economy, which has been happening for two decades. In addition, it is not a phenomenon that has declined in recent years. From 2019 to 2023, home prices rose 22% more than household income. It is not a homogeneous phenomenon either, because housing is a local phenomenon. In the lines accompanying this article, we have seen how, within the urban area, Badalona and Sant Cugat are the two cities with the worst accessibility situation. Two cities close to Barcelona receive the broad wave of Barcelona's attractiveness and its scarcity of land. A phenomenon that has absolutely nothing to do with the development of the income of its citizens. Let us not forget that it is a phenomenon with its own expansionary wave. The inaccessibility of the real estate market, where financial conditions have also tightened compared to previous decades, creates demand for the rental market, a market that is also in short supply (land is the same), and where prices are also experiencing a development completely unrelated to that of income. We know that the next step is increasingly worse housing conditions. It is difficult to combat this global phenomenon, but we can combat stagnant productivity, fiscal conditions – without excesses – and land scarcity. The local impact depends on it.