To buy a house is less and less within the reach of Portuguese families. First the real estate prices increase sharply and salary do not follow this development. second, the Mortgages becomes more and more expensive as Euribor rate ascend. And, as if that weren’t enough, the inflation which is felt in the country – which reached 8.7% in June – further crushes family budgets.
What is the outcome of this scenario? The real income of the families is not enough to pay the annual charges with the Mortgages. And this is a reality felt in the city of Lisbon, where real family income is 83.1% less than what is needed to pay the Mortgages, according to the calculations of the idealist. In Porto, this difference is -13.6%.
THE to buy a house it is a decision for life. And in this process, many factors must be taken into account, such as the house price to buy and the savings available to pay taxes and seize the home loan. It is also important to measure the rate of effort to pay the mortgage loan and to calculate the annual income necessary to pay the advantages of the houseto ensure the financial health of the family.
With the changes felt in the Mortgagesit is also important to carefully consider the new deadlines loan repayment term depending on the age of the holders and the existing interest rate options:
- Variable interest rate: interest will vary depending on the contracted Euribor (3, 6 or 12 months). It should be noted that today the Euribor rate increase for all periods and will increase benefits of the house;
- Mixed interest rate: in this case, households can fix interest for a certain period and then have a variable interest rate;
- Fixed interest rate: in this case, the interest contracted at the beginning of the mortgage loan does not change from the beginning to the end of the contract, so that the family will always pay the same amount of deposit.
In Portugal, most Home loans are variable rate. But with the Euribor fluctuations that made themselves felt – the Euribor 12 months is close to 1% in June and the Euribor 6 months is positive – and the bullish forecast for the future, there are already families looking fixed interest rates, because it gives them greater security and tranquility in the Payment credit, even if it weighs more heavily on the budget. For this reason, there are also several banks pointing to fixed rate home loan as financial paradise for families.
Buying a house in the district capitals: how much income is needed to pay the mortgage?
With real estate prices to climb the summit and the conditions of the Mortgages to squeeze, to buy a house it is less and less within the reach of Portuguese families, especially in large urban centres. This is a conclusion to be drawn from the study of the idealist who sought to understand how families pay for their housing loans taking into account median first-quarter house prices, real incomes and minimum income required for to buy a house.
Note that to calculate the necessary income (in theory) account was taken of a Mortgages with TAN (Nominal Annual Rate) at 1.19% and with a payment term of 30 years, to which a deposit of 20% has been paid. And the discount for trade by zones and a effort rate 30% for the household expenses.
And what are the results? It is in Lisbon that buy a house with a mortgage It’s harder. Here, the median house price last quarter was 490,000 euros, according to data from idealista/data. And, after all, it is in this district capital that the gap between the real family income (28,575 euros/year) and what is necessary (52,231 euros/year) for to buy a house is bigger – that’s a difference of 83.1%.
Then comes the capital of Madeira, Funchal: in this city, the house price in median, it amounts to 350,000 euros. And the real income (24,741 euros/year) are 49.4% lower than the salaries needed to buy a house with a bank loan (36,968 euros/year). Third is Viseu, a district capital where to buy a house costs 235,000 euros and families have, in real terms, 40.3% less income (17,676 euros/year) compared to what they need (24,796 euros/year).
There are a total of 10 district capitals – including islands of Funchal and Ponta Delgada – where the real family income does not arrive for to buy a house with recourse to Mortgages, because they are lower than the minimum necessary income calculated by idealista. These are: Lisbon, Funchal, Viseu, Faro, Ponta Delgada, Braga, Porto, Coimbra, Aveiro and Leiria.
But in 10 other cities, we observe that the Portuguese real income arrive for buy the house at average prices. It is in Portalegre that there is the most budgetary room for maneuver (56.1%): for to buy a house of 75,000 euros (median value), families have 17,357 euros, while the necessary income is 7,612 euros. Also in Bragança and Castelo Branco, real incomes are 36.9% and 29.7% higher than the minimum income necessary for to buy a house, respectively.
These calculations are relevant when choosing the house to buyin particular because it is important to ensure that there is a financial margin in the family budget. “It is important to be aware that several situations can occur that impact the comfort we have today, whether it is the increase in interest rate, job losses or healthcare costs. In this way, when defining the responsibility to be assumed on a monthly basis, we should try to make room for these unforeseen events, so as not to be surprised”, advises Miguel Cabrita, responsible for the idealistic/credit housing in Portugal.
Buying a house in the neighborhood: median prices are falling
Looking at the reality at the district level, it appears that the gaps between real income and minimum requirements are lower than district capitals. And, as a rule, real estate prices, in average terms, they are also lower.
In this analysis, Lisbon is the district with the greatest imbalance, since the average annual income (27,085 euros/year) for to buy a house with a price of 350,000 euros, they are still 38.7% lower than the necessary income (37,570 euros/year). The island of Madeira appears in second position: families here have access to 23,439 euros/year for pay for a house 300,500 euros and, in fact, they needed 31,892 euros/year. Which means there is a difference between the returns of -36.1%.
Also in Faro (-29.2%), Porto (-16.8%), Braga (-10.2%), Viseu (-5.4%), Leiria (-2.8%) and Aveiro (- 1.8%) there are imbalances between real incomes and the minimum necessary to to buy a house market price in the first quarter.
In contrast, most districts have a level of real income more balanced. In Portalegre, families have 17,812 euros per year for pay the house and the minimum income required is only 7,917 euros, which gives them a margin of 55.6%. Also in Guarda (53.3%), Beja (50.8%) and Évora (47.9%), the real income of families far exceeds that needed to buy a house with a mortgage.