The price of rent in Catalonia has grown by 29% in the last decade and salaries by 0.39%

BarcelonaWhen people talk about housing, they often end up discussing salaries. And when housing and salaries are mixed, the debate turns to the country and its economic model. Regarding the latter, a question was frequently asked in several international media in February.Is Spain booming?", they headlined, about the "miraculous" growth of the Spanish economy, including the British The Times, The Guardian and the BBCHowever, some of them reduced the euphoria a few lines below: the GDP per capita (the indicator associated with productivity) turns out not to have grown as much.

Catalonia is not immune to this reality: the Catalan GDP grew by 3.6% last year, ahead of Spain's 3.2% and well above the European Union average (0.8%), but many of its citizens have not seen this reflected in their economic well-being, but rather the opposite. In fact, Catalan GDP per capita has grown by an average of 0.46% over the last 20 years, As detailed by economist Jordi Galí in an article in the ARA a few months ago. The wave of inflation that began with the pandemic, and which was aggravated by the war in Ukraine, has made the cost of living more expensive in recent years, especially through the most basic goods - such as food, which has grown by nearly 30% in three years, and energy. The increase in the price of these two items has affected lower incomes more because they have a proportionally greater weight in their pockets.

Housing, a hole in the pocket

However, the paradigmatic example of the loss of purchasing power, that is, the smaller amount of goods and services that can be acquired with a given amount of money, goes beyond the shopping basket. In fact, there is an area of ​​consumption in which the gap between income and expenditure has been categorical: from 2014 to 2023 the price of rent in Catalonia has grown by 29% and salaries by 0.39%, according to data from Incasòl and the Annual Labour Cost Survey of the National Institute of Statistics (INE). In the Catalan capital, this difference is also evident: the monthly cost of renting a home has grown by 37% in 10 years, according to Incasòl, while the average salary of Barcelona residents has increased by 3%, according to Barcelona City Council. Therefore, in Barcelona, ​​​​rent has increased 12.5 times more than salaries.

These data are in real terms – that is, updated with the consumer price index (CPI) – which allows us to know the increase in the price of a value by eliminating the effect of inflation. If this general increase in prices is excluded – this is called deflation – the net increase remains, in this case in the price of rent and wages, in relation to a type of currency that has not been devalued by the effect of price increases over time.

Therefore, with this increase of 0.39%, Catalans have generally maintained their purchasing power over the last decade, but have lost it considerably with respect to renting a home. In other words, the latter has come to mean a more important part of their income. But this is not a reality only in Catalonia: during the mentioned decade, the CPI has grown – more or less – 19.75% both in Catalonia and in the whole of Spain, but while in the Principality wages have grown 0.39%, in the State they have fallen 1.72% on average in the data from . This means that the Spanish, in this particular decade, have lost purchasing power.

"In recent years, instead of wages increasing, the number of wages has increased. We have chosen an economic model of low-level wages and little added value, and that does not eliminate the greater demand for housing, but rather increases it," explains the executive counselor of the Spanish Association of Advisors (Planifica) to ARA. What is happening, says this economist, is that wages lose purchasing power in relation to housing: "What is certain is that by having higher housing prices, the rest of consumption has had to be reduced. On a per capita basis, it is not visible," he adds.

Therefore, in response to the question of whether Spain is prospering –Is Spain booming?, in English–, and by extension also Catalonia, the answer may be different for the average Spanish and Catalan citizen. Above all, depending on what relationship they have with housing: if they own one or more –and rent them–, if they want to buy one or if they live in a rented house.

Spain, at the bottom of Europe in the wage-housing ratio

This difference between wages and housing is also visible when we compare wages with the price of housing – that is, the purchase value, not the rental value – in real terms. The housing price index (IPV, in Spanish), compiled by the National Institute of Statistics (INE), has grown in real terms by 27.6% in Spain during the decade 2014-2023, 10 percentage points below that of Catalonia (37.18%), which has only been surpassed by the Community6 (4) which grew in real terms by 0.19% and 2.18%, respectively.

According to Eurostat data, from 2014 to 2023, prices in the EU have increased by 26.52% and wages have grown by 1.85% in real terms – that is, eliminating the effect of this 26.52% increase – so Europeans have seen a slight increase. In the case of Spain, according to data from the European Union's statistical office, the adjusted annual full-time salary between 2014 and 2023 grew from 26,701 euros to 32,587 euros, an increase that in real terms – that is, discounting an inflation rate of 4.1% is the European average (1.85%). However, in absolute terms, these 32,587 euros are 5,276 euros gross per year less than the average salary in the EU, which stands at 37,863 euros.

Furthermore, Spain is one of the EU countries with the greatest gap between real wage increases (2.44%) and real increases in housing prices (28.41%), which is considerably higher than the European average (19.72%). In comparison, Spain has recorded inflation in this decade below the European average – 19.14% compared to 26.5% in the EU – but a real increase in housing prices above the average – 28.4% compared to 19.7% in the EU. And compared to the major European powers, Spain (28.4%) has a real increase in housing prices well above Germany (22.8%), France (7.37%) and Italy, where they fell by 14%. In terms of wages, Spanish citizens (2.44%) gained purchasing power in general terms above France and Italy, but not above Germany (3.96%). However, the same cannot be said for housing.

Austria is the European Union country that comes out worst in the picture: housing has grown by 31.5% and wages by 1.3%. However, this state has a different situation to Spain. In this country, the full-time adjusted annual salary was 54,508 euros in 2023 and the majority of its population lives in rented accommodation, especially in its capital, where housing requires less financial effort than in the rest of the major European capitals.60% of Viennese live in "social" housing–. In fact, Austria is the second EU country with the highest percentage of renting population (46%), behind Germany (51%) and ahead of Denmark (40.8%), countries that have a very similar reality to Austria: they come out badly in terms of the difference between the increase in the price of housing and wages5, but. 998 and 67,604 euros, respectively. In Spain, only 24.2% live in rented accommodation, according to Eurostat data.

For the professor of economics at the UB Joan Tugores, this gap between wages and housing reflects a "chronic" problem of the growth model of Catalonia and Spain. "When employment is going well, they boast of growth above the European average, but Spain has a problem of chronic lack of productivity: it generates employment at a salary scale below the average of the countries with which it wants to compare itself," he adds. Regarding the gap between wages and housing, Tugores highlights the current imbalance between supply and demand. "Low and precarious salary conditions make access to housing difficult, it is a conjunction of complex factors: the most important thing is the imbalance between supply and demand. Construction has been stigmatized by the real estate crisis for years and supply has not been allowed to grow at the rate that everything else did, but it also pushes for a minimum percentage of what is desirable.

Breaking down housing as a symptom

For the manager of the Barcelona Chamber of Urban Property, Òscar Gorgues, in cities like Barcelona housing is not the problem, but the consequence of another problem: an economic model based on low-productivity sectors, such as tourism, which generate low-wage jobs. "This generates social diseconomy because these salaries do not pay enough taxes to improve services such as education or health. In a classroom you can put four more students, in a hospital you can put more hours of service, but in a home it is more difficult. You end up breaking it up, and that has already been seen with room rentals," explains Gorgues.

This expert assures that the distance between salaries and housing has been shortened in the case of workers who earn the minimum interprofessional wage (SMI), which has increased by 61% since 2018. "Despite the increase in the price of housing, this less well-paid group now. They still have a very high effort," adds Gorgues.