Spain’s most affordable cities to live inLaurence Lemoine
These are the Spanish cities where it is most affordable to pay the mortgage or rent, according to UVE Valoraciones.
At a time of great economic uncertainty worldwide, making the decision or simply being able to afford to buy a home is becoming very difficult for many citizens. It is clear that obtaining financing to buy a home has become more difficult with the rise in interest rates, affected by the Euribor and the virtual disappearance of fixed-rate bank offers, at least with interest rates below the current rate of the main reference index for mortgages in Spain.
The other option in the absence of the possibility of buying is renting, but in some areas rents have risen much faster than sale prices, which means that paying monthly rent can mean a monthly expense that is simply too much to handle. Looking at both buying and renting property, what are Spain’s most affordable cities to live in? We have the details, thanks to a study by UVE Valoraciones.
Is it better to buy or rent in Spain?
Making comparisons to determine whether it is better to buy or rent a property is marked by the major obstacle, especially for those looking to buy their first home, of having to assume that 20% of the price of the house that banks do not finance, in addition to the taxes and expenses associated with the purchase, which represent between 8% and 12% of the operation.
Therefore, to give families an idea of the housing market in the main towns and cities in Spain, the valuation company UVE Valoraciones has presented, for the second year running, a comparative study of what it has meant in the last year to pay monthly rent and mortgage repayments.
Where is it best to buy and where to rent?
The study states that in 11 of the 112 cities analysed, renting clearly outweighs buying, headed by San Sebastián, Getxo, Alcobendas, but also Palma, Sant Cugat del Vallès, Pozuelo de Alarcón, Marbella, Majadahonda, A Coruña, Rivas-Vaciamadrid and Pamplona. “The best option in these cases is to rent rather than buy. The increase in mortgage repayments has been much higher than the increase in rents over the last year”, the study states. In all of them, the monthly mortgage fee is higher than the rent.
However, despite the fact that in the rest of the cities the mortgage payment is more affordable than rent, the president of UVE Valoraciones, Germán Pérez Barrio, states that a percentage of over 85% is a fairly reliable indicator that it is probably preferable to rent rather than buy in the municipality. Above this percentage and almost close to 100% are Orihuela, Las Rozas de Madrid and Fuengirola, but also Madrid, Bilbao and Barcelona.
The valuers establish two more fields: an intermediate one, between 75%-85% variation, for which each particular case would have to be studied to clarify whether it is better to buy or rent, as for example in Valladolid, Seville, Las Palmas de Gran Canaria, Malaga or Zaragoza. Below 75%, it will almost always be preferable to buy rather than rent, as in Valencia, Murcia, Alicante or Tarragona, and 37 other cities.
To carry out this analysis, UVE Valoraciones has calculated the mortgage payment corresponding to a loan of 80% of the value of the offer, with a term of 25 years and an interest rate of 3.5%, using idealista data on sale and rental prices as a reference. The choice of 3.5% is the result of adding a differential of 0.7% to the Euribor in November (2.8%); most fixed rate offers already exceed 3.5%. The company has compared the resulting monthly mortgage repayment with the corresponding rent (in euros/m2 and month), obtaining the percentage resulting from dividing the unit monthly mortgage amount by the unit rent.
Mortgage payments have risen more than rents over the last year
Although rents have risen this year, the rise in interest rates has pushed mortgage repayments much higher than rents in most of the cities analysed. Only in 12 of the 110 municipalities studied have rents risen more than the corresponding payments, such as in Santa Coloma de Gramenet (Barcelona), Molina de Segura (Murcia), Leganés (Madrid), or Reus (Tarragona). Of the 20 most populated municipalities in Spain, the quota/rent ratio has evolved in favour of quotas only in Barcelona and Alicante, as rents have shot up in both capitals.
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