Spanish developers deny housing bubble and float 70-year mortgages

Spanish developers deny housing bubble and float 70-year mortgages

At the fifth edition of La Gran Jornada Inmobiliaria, organised by elEconomista.es, executives from Grupo Gestilar, Premier España, Grupo Ferrocarril, Grupo Insur and Aurora Homes warned that the current state of the property market has nothing to do with the 2007 bubble. Their diagnosis is that the shortage of land and labour will keep pushing up costs and, as a result, housing prices will remain under pressure with no sign of easing in the coming years. All of this, they say, is made worse by families' difficulty in saving. The phrase that hung in the air was that "who's to say we won't see 70-year mortgages", a prediction made without blushing by the development sector, and one that has set off every alarm among those who remember what peine almost two decades ago.

What exactly the developers are saying and why they deny there's a bubble

The sector's official argument is that today's market bears no resemblance to 2007. There is, they maintain, neither the same level of oversupply nor the same indiscriminate access to credit. What there is, they say, is a supply problem: not enough is being built because there is a shortage of developable land and of skilled workers to build homes at the pace demanded. That bottleneck, they argue, is what pushes prices up and makes housing increasingly unaffordable for middle incomes.

The logical consequence of that narrative is longer mortgage terms. If prices don't fall and wages don't rise, the only way someone on an ordinary salary can sign a mortgage is by stretching out the timeline. From there to talking about 70 years is a short step, and the developers took it without batting an eyelid. The underlying idea is that debt becomes a kind of travelling companion that outlives the borrower themselves.

The 2008 precedent and scepticism about "this time is different"

The most common reaction comes from those looking back with concern. "Hehe, this smells like 2008, they were saying the same thing back then, I even heard it from some yuppies before everything blew up in the middle of the green shoots", sums up one of the first comments. It is not an isolated view: throughout the conversation the idea recurs that this kind of statement is the usual prelude to a correction. "This feels like 2006 all over again.. and cranes are already starting to appear.. in 2-3 years we'll have another meltdown", notes another message, in a vein that mixes memories of the construction boom with the suspicion that the cycle is repeating.

Some go further and argue that the parallel with 2008 is not coincidental but structural. "That's how everything blew up in 2008, offering 40-year mortgages to people on a grand a month", points out one comment focusing on the kind of financial product being offered to those who cannot afford it on reasonable terms. The conclusion drawn is that stretching out the mortgage does not solve the underlying problem, it merely pushes it forward, and that pushing has a limit: the moment when the buyer cannot manage even the smallest payment.

Land, labour and the role of the authorities

One of the points where the analysis becomes more concrete is land. The thesis that the state or public authorities will eventually hand over land on very long-term lease arrangements — 99 years is the figure being floated — appears as a logical outgrowth of the shortage. "And the land won't be yours, it'll be a state transfer (or lease) for 100 years or so", it is suggested, an idea that connects with historical legal figures such as the emphyteusis, already used in Catalonia before mortgages as we know them existed.

In parallel, the discussion about administrative responsibilities takes centre stage. Against those calling for direct intervention by the central government, it is pointed out that territorial planning, urban planning and housing are the responsibility of Spain's regional and municipal governments. "The central government is guilty, yes, but of looking the other way while local mafias line their pockets", sums up one comment that shifts the focus from Moncloa (the Spanish prime minister's office) to town halls and regional governments. The practical consequence is that any solution requires agreements that do not exist today.

The constitutional reform trap and the maze of responsibilities

When reforming the Constitution to change the division of powers is raised, the answer is a reminder of parliamentary arithmetic. It would take two thirds of both the Congress and the Senate, the dissolution of both chambers, new elections, that majority being rebuilt in the new parliament, and rounding it off with a mandatory referendum. "Sure, piece of cake, we'll have it done in two evenings", one message quips, making it clear that the constitutional route is, in practice, a path full of obstacles.

The result of that deadlock is that the problem festers. As long as there is no land, no labour and no change to the rules of the game, housing prices will trinc their own momentum. And 70-year mortgages, far from being a solution, are presented as the symptom of a market that has decided the problem is not the price, but the term.

Who will sign these mortgages and who will inherit them

The question hanging over the whole discussion is who on earth is going to take out a 70-year mortgage. "And who's going to take them out? I ask, and I miccionan it. The kids, the ones coming from elsewhere, the ones going elsewhere...?", one message asks, hitting the nail on the head. The answer that emerges from the market itself is that they will be signed by those who already have assets or who receive help from their family, because on an average salary and at today's prices the maths simply don't work.

The other front is inheritance. "Heirs, they say, hahaha, the children, what children??", comes the ironic response from a position that highlights the contradiction between calling for longer, inheritable mortgages and demographic reality. "They actually said the best inheritance you can leave your children is a nice big mortgage", it is recalled, a phrase that sums up the absurdity of turning debt into a legacy. The conclusion is uncomfortable: if debt is inherited, the next generation's freedom is mortgaged before it can decide anything.

Tourism, immigration and pressure on the market

Behind the debate lies demographic and tourist pressure. Some argue that tourist overcrowding and the arrival of foreign residents are straining housing demand in cities like Barcelona or Madrid, while others point out that immigration responds to the need for labour in sectors such as construction. The discussion sometimes veers into harsher territory, but the economic core is clear: the more people competing for the same housing stock, the harder it is for prices to give way.

The paradox is that the very phenomenon pushing up prices is what keeps the sector's activity going. Without demand, there are no cranes; without cranes, no jobs; without jobs, no ability to pay. The circle closes in on itself and leaves families in the middle, squeezing their budgets to make ends meet while being told the solution is to sign a mortgage that will outlast their own working life.

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The prediction that emerges from all this is that the market will remain under pressure as long as the rules on land and financing do not change. With caveats: if credit becomes more expensive or employment weakens, demand will contract and the correction will come through prices, not through terms. No one knows when, but recent history suggests the end of a cycle is not announced by longer mortgages, but by mortgages that stop being signed.