The Fitch financial rating agency says it expects “challenges in access to housing to persist, as nominal household income gains projected in 2024-2025 are globally equal to housing price trend expectations”.

This means that the national average value of housing prices should remain between 5.5 and 6 times higher than the annual gross family income, both in Portugal and in Spain. As expected, the accessibility ratio is significantly higher in large urban metropolitan areas, such as Madrid and Lisbon, by almost eight times, according to a report by idealista.

According to Fitch estimates, house prices (nominal) are expected to grow annually between 4% and 6% in Portugal and between 3% and 5% in Spain. This dynamic will be fuelled by “persistent limitations in housing supply”, especially in less populated areas. In cities and tourist areas, a “solid” increase in the supply of houses is expected.

Fitch expects home loan demand and financing conditions to improve in 2024 compared to last year, as lower interest rates are expected, something that should happen after the European Central Bank (ECB) begins to lower their key interest rates.

However, access to affordable housing is “a key social concern in both countries, especially for young families and first-time buyers with little savings capacity.” It is in this context that the agency refers to the support measures announced by political leaders in both countries, such as the Spanish guarantee scheme for young families and Portugal's tax benefits to increase the housing stock.

Regarding bank financing, Fitch highlighted that, for the first time in history, housing loans at mixed rates - which combine an initial period of fixed interest, followed by a variable rate - have become the norm in both Iberian countries, with a dominance of 70% in Portugal and 40% in Spain.

The bad news is that the agency predicts that there will be a “slight increase" in defaults on housing loans throughout 2024, due to “the erosion of disposable income” as a result of the impact of inflation. On the other hand, defaults will be mitigated “gradually ” in 2025, as Euribor reductions in the coming months make payment conditions for variable rate (or mixed variable period) loans more flexible.