Brussels: Spanish housing overvalued by 20%, rents surge while wages lag

The Brussels warning: Spanish housing is 20% overvalued

How much of what you pay for a flat reflects its true value, and how much is a bet that someone will pay even more tomorrow? Brussels has put a number on that suspicion: an average overvaluation of 20% in Spain's property market. The warning, reported by El Confidencial, highlights a gap between prices and the real financial capacity of families, raising an uncomfortable question: if the average is 20%, how much are the thousands of flats above that average being sold for? Because some argue that more than half of the housing stock is overvalued by 40% to 60%.

This is not the first time such claims have been heard. Comparisons with 2006 appear in every paragraph, almost always with the same conclusion: it is worse than then. Back then, the focus was on buying; now there is a second front, renting, which has spiraled out of control without anyone finding a way to rein it in.

Why is housing rising?

The most repeated explanation is textbook: low supply and high demand. Supply falls short due to a regulatory maze that increases costs and delays every development, while demand has globalized, with high-income foreign buyers, retirees from Northern Europe seeking climate, and international capital treating Spanish property as a safe haven. In Spain, life is good: temperature, food, and a state that —arguably— does not interfere too much with certain activities.

The counterargument comes from the other side: prices rise because someone pays. A property is worth what another is willing to put on the table, and as long as that hand remains raised, the seller has no reason to lower the price. It is the classic defense of the owner, clashing head-on with those who argue that price is set by real purchasing power, not desire. An old debate, identical outcome for the house hunter.

Rent: the bubble that did not exist in 2006

Here the diagnosis becomes harsh. In one case detailed in the thread, a rent of 800 euros in Carabanchel —a flat that is often just a basement— comes with minimum income requirements of 2,300 euros per month. The government reference cited is not to allocate more than 30% of income to rent and utilities; below that threshold, the tenant would enter the vulnerable category and trigger special protections, according to the thread. At current prices, many households would fall into that category without having signed anything.

This is compounded by disguised supply: seasonal rentals, single rooms, shared housing with a sheet acting as a partition. The property is fragmented so that every square meter quadruples its profitability, resulting in a stable rental contract becoming the exception. If the labor market tightens and layoffs begin, the equation does not hold.

Flats from the 1970s at the price of an English house

The numbers circulating leave the impression that the market has decoupled from physics. A 70 m² habitable flat in a 1970s block, with no thermal or acoustic insulation, a communal roof, and no garage, receives offers of 300,000 euros. In the UK, a house of 150 m² with 200 m² of garden, modern insulation, and a private garage costs a comparable figure. The conclusion anyone draws: what you pay here buys land and paperwork, not quality.

There are more repeating examples. A flat bought in 1967 for 25,600 pesetas is now rented for 1,100 euros per month. And on the new build side, the accounts get tangled: a three-bedroom house, 85 m², and A energy efficiency costs around 30,000 euros according to one calculation that others openly dispute, because land, licenses, and taxes are not free.

The gap Brussels does not measure: wages

The 20% overvaluation is only half the problem. The other half is purchasing power, and the differential with the rest of Europe is hard to defend here. Some ask why overvaluation is a problem in Spain and Portugal but not in Denmark or Germany, and whether the real gap lies in wages that have failed to converge with those of neighbors for years. The trap is summarized in one circulating phrase: aiming simultaneously for a French-style minimum wage, German-level salaries, and prices from another latitude.

Meanwhile, the dominant discourse on the street is that nothing can be done: that total, nothing will change; that whoever comes next can grit their teeth. It is the perfect alibi for touching neither supply, nor taxation, nor land. The problem ceases to be a problem and becomes a landscape.

And meanwhile, the figure remains there

Calm down: the warning obligates nothing. Brussels advises, the owner adjusts the price in their imagination, and the tenant continues signing. Everything functions exactly the same, only now with the suspicion certified from abroad.