Housing policies for young house buyers

Zapatero to help the young by making housing more accessible

The Spanish president, José Luis Rodríguez Zapatero, has promised that the government will make housing policy a priority in order to make more housing available to a high number of young people.

Zapatero made these declarations yesterday in the closing ceremony of the 23rd Young Socialists Federal Congress in which he indicated that housing was part of PSOE’s electoral commitment and that it was an issue that especially affected young people as well as many workers which is why he assured that the government was intending to make a great effort to help young people get access to housing.

In his cabinet shuffle earlier this month, Rodriguez Zapatero substituted the previous Housing Minister for Carme Chacon. One of the new minister's first initiatives on occupying her post was to name a new director of the Public Renting agency. The agency was created during the first year of the Socialist Government and was meant to present youngsters with affordable rented accommodation, but has as yet failed to have any great impact on the Spanish real estate market.

Related: Property for sale and rent in Spain

Reverse mortgages in Spain getting more popular

The "reverse mortgage" in Spain is based on a simple idea aimed at helping those over 65 years old who own their own house or flat but find it difficult to make ends meet at the end of the month. With a ‘reverse mortgage’ they can receive payments from the bank monthly over a limited length of time or a one off payment and continue to live in their own homes for the rest of their days.

Although this financial product has been available for five years, it has only been over the last two years that it has really taken off. Furthermore, the new law governing mortgages which is due to come into effect in the autumn could act as an incentive for more banks to offer ‘reverse mortgages’.

Up to now only around a dozen of the big building societies and banks offered reverse mortgages. However, according to a survey published in El Pais yesterday, one out of four people between the ages of 55 and 80 are very interested in this product. In fact almost 90% of those questioned were home owners and almost the same number of people also expressed the desire to live in their own homes until they died. Despite there being no official statistics on a reverse mortgages it is believed that around 10,000 have already been taken out.

Nevertheless Spain's biggest high street banks still regard reverse mortgages with a certain degree of suspicion and argue that legislation is still too vague regarding these kind of financial products.

In Spain around 30% of the population is over 65 years old – almost 14 million inhabitants - a growing figure which has persuaded smaller banks such as Ibercaja or Caixa Terrassa to offer reverse mortgages. El Pais reports the case of Roger Mateu and Rosa Verdaguer, both of whom are 82 years and who a year ago realised that their attic flat of 60 m2 in the centre of Barcelona could help them raise their standard of living. They took out a reverse mortgage for 300,000 euros and in return will receive 1,200 euros per month over the next 12 years. If the couple live another 12 years they will receive a total of 172,000 euros, which is 57% of the total mortgage. They told the newspaper that neither of them thought that they would be around to see the 12 years period finish, but if they were, according to the conditions of their reverse mortgage, they would still have the right to live in their own homes to the end of their days. The extra 1,200 euros per month is a welcome addition to their monthly pension of just 700 euros and, according to Mateu, now with their extra income from the bank if either of them get ill they will be able to stay at home and pay somebody to look after them.

The reverse mortgage offers its clients the commitment that following their death their inheritors have the possibility of repaying the bank in order to get the property back (the rest of the mortgage plus money received and interest). If this does not happen the bank has to pay the inheritors the balance of the unpaid mortgage agreed with its clients.

Reverse mortgages have evolved from another product which consists of property owners signing over their property to the bank which then guarantees them an income for the rest of their lives and allows them to live in the property for the rest of their lives. However, following their deaths their inheritors do not have the possibility of repaying the bank and getting the property back. All transactions are done before a Notary and the property is recorded on the property register just like any other property sale. All costs are paid by the buyer (the bank) including real estate tax.

Related: Mortgages in Spain

Further indication of Spanish housing market slowdown

The housing market in Spain is slowing down according to recent studies carried out by 2 internet property-selling sites in Spain. Both studies show that there has been a drop in price rises for used housing in Spain during the last year.

The study by Facilisimo highlights that prices rose by just 1.8% until June 2007, and that prices have infact dropped in 4 Autonomous Regions and 15 provinces in Spain. Their statistics show that in Madrid prices dropped by 1.98% to 4,151 euros per square metre and 1.85% in Barcelona to 4,900 euros per square metre.

Best places to buy in Spain according to current trends in the property market

According to Facilisimo's report, other parts of Spain are also showing signs of being affected by the slower rising prices in the used property market. The provinces with the biggest drop in prices so far in 2007 are Palencia (8.22%), Soria (7.43%), Valladolid (3.31%), León (2.89%) and A Coruña (2.58%). In Extremadura prices dropped by 1,9% to 1,288 euros per square metre and prices dropped by 0.4% to 2,712 euros per square metre in Navarra. In the Rioja, Catalonia, Galicia and the Valencian Region, prices rose by less than 1%. The biggest price rises were registered in the Balearic Islands (7.1%), Cantabria (7.01%) and in Andalucía (6.73%). The report expects the stagnation in property prices to continue for the rest of the year.

Another report by Idealista analyses prices in just 3 Spanish cities - Madrid, Barcelona and Valencia. Prices in Madrid were found to be stagnant and there was a small fall of 1.3% in Barcelona. This report claims that the slowdown in the Spanish housing market is increasingly evident given the new data of prices in Madrid and Barcelona since these two cities usually set the trend for the overal real estate market in Spain and are usually 5 or 6 months ahead of other cities.

Between April and June prices in Madrid remained stagnant with just a slight rise of 0.1% whereas in Barcelona the first drop in prices since 2001 was registered. Valencia, on the other hand was helped by the hype surrounding the American Cup and prices increased by 1.2% in the second quarter of this year. The report found that used property prices in every neighbourhood in Barcelona dropped slightly and that the price of a square metre in more than half of Madrid’s districts has also dropped. Idealista has admitted that their predictions at the end of 2006 that prices would rise by 1 or 2% this year turn out to have been over optimistic.