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ֳ Wire

Iberia’s Housing Affordability Squeeze Continues

Tue 08 Apr, 2025 - 12:33 PM ET

Related Content: Iberian Mortgage Market Performance Monitor: April 2025

ֳ-London/Madrid-08 April 2025: Housing affordability ratios will remain materially stretched in Iberia’s main cities like Lisbon and Madrid, where the ratio of house prices to nominal household income is well above national levels, ֳ says. Affordability challenges reflect continued supply-demand imbalances.

The persistent housing supply deficit relative to intense demand, driven by positive demographic trends and by non-resident buyers who are prepared to pay a substantial premium, has supported rising prices. In the Iberian capitals, it has driven house price-to-income ratios to about 8x, compared with 6x nationally. Lisbon has seen the biggest increase, from about 5x a decade ago.

Despite stretched affordability, we have revised up our 2025 year-on-year nominal home price forecasts by 2pp for Portugal and Spain, to 8%-10% and 6%-8%, respectively. This update reflects favourable macroeconomic momentum in Iberia linked to strong labour markets and projected interest rate cuts. Nonetheless, there is potential for further revisions if a weaker global economic outlook and uncertainty stemming from US trade policy proves significantly negative for the Spanish and Portuguese economies.



We continue to see insufficient public and private investment in new housing developments to bridge the gap between low supply and very strong demand. Enhancing the social housing stock and streamlining the construction process could be game changers for boosting supply in the medium term.

Debt service ratios for residential mortgages have improved amid actual and anticipated interest rate cuts. ֳ forecasts the late-stage arrears ratio for the residential mortgage loan book at national level to remain stable in Portugal at around 1.25%-1.75%, and to decrease moderately in Spain to 2.25%-2.50%.

“Iberian Mortgage Market Performance Monitor: April 2025”, is available at or via the link above.

Contacts:

Francisco Saez
Associate Director, Structured Finance
+34 91 702 5775
francisco.saez@fitchratings.com
ֳ Ireland Spanish Branch, Sucursal en España
Pza de Pablo Ruiz Picasso 1 Torre Picasso 19th floor Madrid 28020

Jorge Fernandez
Associate Director, Structured Finance
+34 91 076 1981
jorge.fernandez@fitchratings.com

Mark Brown
Senior Director, Credit Commentary and Research
+44 20 3530 1588
mark.brown@fitchratings.com





Media Relations: Athos Larkou, London, Tel: +44 20 3530 1549, Email: athos.larkou@thefitchgroup.com
Pilar Perez, Barcelona, Tel: +34 93 323 8414, Email: pilar.perez@fitchratings.com

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