Spain | Wealth: another housing issue

Wealth stagnation may be influencing consumption and investment decisions. The recovery of prices in the real estate sector will help to improve the trend. However, the concentration of wealth in housing has negative externalities.

Key points

• Key points:
• According to the Bank of Spain, the difference between the value of household assets and liabilities has barely increased in real terms since 2021, thus breaking its annual growth path of 4% (discounting inflation) since wealth began to recover in 2014.
• The recent increase in savings can be explained by households' attempt to recoup capital losses caused by inflation and low market returns. The recovery of private consumption will depend on a return to the growth trend prior to the rise in the cost of living.
• In Spain, housing prices have increased less than inflation since 2021, but this will change. Demand will put upward pressure on prices, especially in urban centers and tourist destinations
• The recovery of prices in the real estate sector and the fall in inflation may result in an improvement on the trend observed up to 2021. However, the concentration of wealth in housing has negative externalities.
• The concentration of wealth in real estate assets has many disadvantages. One of these is the inequality it creates. Another is that it is a procyclical and illiquid asset.

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