The Cost of Living in Spain: 1981 vs 2011

Published on 26/09/2011 in Living in Spain

This article was originally posted by Nick Snelling on his Culture Spain blog:

A very interesting graph relating to the cost of living in Spain was produced by a Spanish financial site a couple of weeks ago that is well worth having a look at. As you can see below, it shows comparative prices of some major items between 1981 and now (2011) based upon the Spanish Consumer Price Index.

The two vital factors to see are, of course, Spanish salaries (which have barely moved in 30 years) and house prices in Spain (that have risen tenfold during the same period) – which goes some way to explaining why Spain is in such a disastrous economic mess now. It also brings into question (yet again!) the competence of Spanish state economists who should have been screaming blue murder as they saw the massive disparity growing between salaries in Spain and Spanish property prices.

Cost of living in Spain 1981 Vs 2011

Surely, it was not ‘rocket science’ to see that ‘something’ was going (and latterly had gone) way out of kilter?

Incidentally, the graph mentions a flat in Paseo de la Castellana as an example of a Spanish property that has gone up by a factor of 10. At first sight this may seem a rather extreme example as the Paseo de la Castellana is one of the main arterial roads through Madrid with prices, in some parts, rivalling Mayfair in London.

However, within my own coastal town of Gandia in Valencia Province you could have bought some (pretty poor) flats in 2003 for around 10,000 Euros. By 2007 these same flats were selling for 100,000 – 110,000 Euros and so had risen tenfold in price.

Of course, not every property in Spain had increased in price by a factor of 10 by 2007 but a significant number had and most properties in Spain (particularly along the coast and in the big cities) had gone up by a minimum of several hundred percent. Land prices for building in Spain had certainly rocketed to ridiculous levels and this included much agricultural land that had the possibility (not always ever realised) of being re-designated as building land.

Needless to say, the current Spanish property crash is re-adjusting property prices radically with prices of Spanish property having fallen dramatically since 2007 – in some cases by as much as 40% (despite Spanish state statistics to the contrary).

What the graph does not show, sadly is the incline of Spanish property prices over the past thirty years which, with some ups and downs, really only took off in a truly massive way from around 2000. So the thirty year time period is probably grossly distorted by the last ten when it comes to Spanish property prices.

The worrying thing for anyone Spanish during the past thirty years, needless to say, has been the effective freezing of the purchasing power of Spanish salaries. This has made the cost of living in Spain increasingly expensive as shown, for example, by the cost of the SEAT car in the graph. Whilst bread, milk and ham may have dropped in price, this has not been the case with many other essential commodities such as fuel and gas. So, many Spaniards, for a long time, have been trapped between a ‘rock and a hard place’…

For us foreigners, however, the cost of living in Spain, for many years, has generally been very much cheaper than for our home countries (if from Northern Europe or the US) – although, since the introduction of the Euro, for Britons, much has depended upon the strength of Sterling at any given time.

Certainly, now, from a UK perspective, Spain is providing reasonably good value for money. The cost of living in Spain is markedly less for a number things including eating out and Spanish property rates although general shopping prices are probably not greatly different. However, the radical drop in Spanish property prices is now once again making Spain a tempting place in which to buy – with Spanish property prices finally providing value for money for the first time for a number of years.

Incidentally, if any of you are economists – I should be very interested in seeing a graph like the one above for the UK and the US!

Written by: Nick Snelling (CultureSpain.com)

About the author:

I am a journalist and author of four books (three of which are about Spain) and I live permanently in Spain with my family. Indeed, I have lived in the Valencian mountains of Spain (not far from Gandia) since 2003, although I have known Spain well since the mid 1970s.  See my website about Spanish Culture at www.culturespain.com




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Comments:

Paul_B said:
30 September 2011 @ 10:44

Official figures from all over EUrope have been massively fiddled to show a falsely flattering picture of our economies. If you want a real eye-opener as to the truth, check out www.shadowstats.com - this is an American based site, but what it shockingly illustrates holds good for europe, too.


ndy said:
28 September 2011 @ 16:28

Maybe the house prices have been pushed up by the number of expats recreating England in the Sun? We have only ourselves to blame, and from my experiences, the Spanish do not thank us for the changes that we, as a nation, have done to their beautiful country....


Eamon said:
28 September 2011 @ 02:40

Your article says nothing about Spain. The same thing happened all over Europe. Property prices went mental,and have now crashed. It´s happened before and will happen again. Industry is driven by greed.


Bill said:
27 September 2011 @ 10:12

"What the graph does not show, sadly is the incline of Spanish property prices over the past thirty years which, with some ups and downs, really only took off in a truly massive way from around 2000. So the thirty year time period is probably grossly distorted by the last ten when it comes to Spanish property prices."

Around 2002 to be precise.

Can anyone guess why?


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