Thursday, February 29, 2024

Rent eats up 80% of their salary and to buy it

The first half of 2023 brought a slight increase in the youth release rate in Spain, which rose above 16% (in particular, up to 16.3%). However, this rate is still far from the level reached before the pandemic (18.7%), from the highest 26.1% recorded in 2008, and from the European Union average (31.9%), according to the most recent report from the Emancipation Observatory of the Spanish Youth Council (CJE).

Why is it almost impossible for young people to get out on their own in Spain? The answer is simple—although what is behind it is not so simple—because young people cannot access houses under almost any kind of regime. Not even close to a room.

Buying a home is an almost impossible mission for most young people. To do this, it is necessary to have a large amount of money saved to cover not only the expenses but also the down payment for the purchase of the house in question because banks generally only lend a maximum equal to 80% at an estimated cost. The paradox of this matter is that, as the report “Present and Future of Youth in Spain” prepared by the BBVA Foundation and the Ivie shows, the relative cost of rent has increased in such a way that, since 2016, it is higher than the monthly mortgage payment on home ownership. However, the monograph adds that, considering the conditions of access to mortgage financing known to young people, which are mostly derived from job instability, this option is not possible for them. In addition, he added, to cover the initial payment of the purchase, an initial savings is required, which is about 3.7 times the annual salary of a young person.

Renting is also not an option.

Faced with the almost impossible climbing wall represented by sales, renting has emerged as the most common and easy form of emancipation for young people. However, the increase in prices every year is also higher than that of young people. “It is becoming increasingly difficult to access a rent that represents, at most, 30% of the median salary of a young person, which most studies have shown to be the most acceptable,” explained the Spanish Youth Council.

The median rental price in the first half of 2023 is the highest since there are records: 944 euros per month. This represents 93.9% of the median net salary of a young person (1,005.22 euros per month in 12 payments, or 12,062.59 euros per year). If we add to this the average cost of supplies for a house (138.12 euros per month), the rental price alone will increase to 1,082.12 euros, so a young person will need 76.9 euros to live alone, warns the Young Observatory.

Focusing on the issue of expenses, another recent study by the Foessa Foundation (Promotion of Social Studies and Applied Sociology) ensures that the homes of young people present what they call excessive housing costs. This happens when, once the house is paid off, the remaining household income puts it below the extreme poverty threshold.

The analysis of Fundación BBVA and Ivie also highlights the fact that things become more complicated in the first years, given that salaries are lower. The relative cost of housing based on monthly salary is higher for the youngest (18 to 24 years old) than for those between 25 and 29 years old.

Renting a room already represents more than 37% of your salary

Renting a room in a shared house is also not a cheap option: it costs 375 euros per month, equivalent to 37.3% of a young person’s salary, a situation that occurred in 10 of 17 autonomous communities. In four, it exceeded 40%. In addition, the rooms became more expensive by 7.1% per year.

It is not surprising, given these difficulties, that the houses that emancipated youth live in are often smaller than average. According to the BBVA and Ivie Foundation monographs, the houses where young people live are usually concentrated in densely populated areas, in municipalities with more than 100,000 inhabitants. When the main breadwinner in a household is a young emancipated person, the percentage of small houses in areas with a large population increases significantly (43.2%), a thing that happens to a small extent in medium- and small-populated areas where the cost of living is lower than in densely populated areas and more expensive, the document added.

World Nation News Desk
World Nation News Desk
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