Renting for €600 or buying with €700 in interest alone
In Santander, Spain, renting for €600 is cheaper than buying with €700 going to interest alone. Rental subsidies create an absurd border effect.
English · Original discussion in Spanish · Published
Renting for €600 in Santander or buying with €700 in interest alone: the calculation that debunks the myth of buying as a safe investment
The eternal rent-versus-buy debate has no single answer, but geography changes everything. In central Santander, you can rent an apartment with utilities included for €600 a month. To buy a similar property, the mortgage interest alone starts at €700 a month. In other words, buyers pay more each month without paying off a single cent of principal. The argument that "the apartment will be yours someday" clashes with the reality that the monthly payment keeps rising whenever the Euribor moves.
The rental subsidy that rewards €1,000-a-month earners and punishes anyone making €1,500 more
In 2007 the Spanish government granted a subsidy covering 50% of rent (40% state, 10% regional) to young tenants with household income below 2.5 times the IPREM (Spain's public income indicator) – that year it was €5,990, meaning a cap of €14,975 a year. The effect is perverse: a family earning €14,500 receives €300 a month; one earning €15,500 receives nothing. The income jump not only fails to compensate, it leaves the second family worse off net.
The paradox deepens when comparing regions. A €1,000-a-month earner in Santander can live independently with the subsidy, while in Madrid or Barcelona the same profile doesn't even consider renting because prices are three times higher. The simplistic solution – "move north" – runs into labor market reality: skilled jobs are concentrated in Madrid and Barcelona.
Living beyond your real means
It's not all the fault of prices. As the sharpest analyses pointed out, Spain's real problem wasn't a lack of subsidies but leveraged consumption. Mortgages at 120% of appraised value, more credit cards than mobile phones, and family as a safety net allowed a standard of living far above real income. Santander, despite being cheaper, led that ranking of irrational debt.
An ironic closing: so while a tenant in Santander paid €600 with the subsidy and lived comfortably, a Madrid earner making €1,000 a month dreamed of a mortgage that would never come. Buying wasn't better or worse: it was a luxury only available to those who already had their parents' apartment or a paycheck well above average. Everyone else kept paying rent that, at least, didn't tie them to a lifelong debt. The ironies of a country where saving €1,000 a year made you a subsidized poor person.
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The eternal rent-versus-buy debate has no single answer, but geography changes everything. In central Santander, you can rent an apartment with utilities included for €600 a month. To buy a similar property, the mortgage interest alone starts at €700 a month. In other words, buyers pay more each month without paying off a single cent of principal. The argument that "the apartment will be yours someday" clashes with the reality that the monthly payment keeps rising whenever the Euribor moves.
The rental subsidy that rewards €1,000-a-month earners and punishes anyone making €1,500 more
In 2007 the Spanish government granted a subsidy covering 50% of rent (40% state, 10% regional) to young tenants with household income below 2.5 times the IPREM (Spain's public income indicator) – that year it was €5,990, meaning a cap of €14,975 a year. The effect is perverse: a family earning €14,500 receives €300 a month; one earning €15,500 receives nothing. The income jump not only fails to compensate, it leaves the second family worse off net.
The paradox deepens when comparing regions. A €1,000-a-month earner in Santander can live independently with the subsidy, while in Madrid or Barcelona the same profile doesn't even consider renting because prices are three times higher. The simplistic solution – "move north" – runs into labor market reality: skilled jobs are concentrated in Madrid and Barcelona.
Living beyond your real means
It's not all the fault of prices. As the sharpest analyses pointed out, Spain's real problem wasn't a lack of subsidies but leveraged consumption. Mortgages at 120% of appraised value, more credit cards than mobile phones, and family as a safety net allowed a standard of living far above real income. Santander, despite being cheaper, led that ranking of irrational debt.
An ironic closing: so while a tenant in Santander paid €600 with the subsidy and lived comfortably, a Madrid earner making €1,000 a month dreamed of a mortgage that would never come. Buying wasn't better or worse: it was a luxury only available to those who already had their parents' apartment or a paycheck well above average. Everyone else kept paying rent that, at least, didn't tie them to a lifelong debt. The ironies of a country where saving €1,000 a year made you a subsidized poor person.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (24 replies).
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