The labour market's good evolution is boosting the housing market. Several of Spain's main provincial capitals are reporting record employment. This improvement in employment, together with the upward trend in household creation, is boosting residential demand.
This is according to a study by the Urban Land Institute (ULI), a non-profit educational and research organisation founded almost a century ago in the USA. The report, entitled Living Rental Market, focuses on analysing the rental market in Spain.
One of its main focuses is to highlight the fundamentals that explain the high demand for housing in the country's large cities, such as household growth and job creation, in addition to the improvement in households' disposable income.
"Demand continues to show remarkable strength: both the number of households, with an upward trend over the last five years, and the number of workers registered with Social Security, have experienced significant growth. In several of the cities analysed, these indicators are at record highs. In addition, the third key component of rental demand, net disposable income per household, has increased in all the cities analysed since the previous six-month period," ULI explains.
Growing households, employment and income in large capitals
The study focuses on Madrid, Barcelona, Malaga, Seville, Valencia, Alicante, Murcia, Zaragoza and Bilbao, and shows a generalised growth in household creation and employment. In some cases, registration is even at record highs.
According to ULI, Madrid had 2.31 million Social Security contributors at the end of 2023 (almost 90% of them in the General Scheme), with a growth of 16.1% in the last five years, a new all-time high. In this period, moreover, the number of households in the Spanish capital has increased by 3.6% (to 1.3 million), while the average net household income stands at €43,953, an increase of 11%.
Alicante is another of the capitals where employment has broken records. The city has gained 21.6% of registered workers in the last five years, reaching 213,000 people registered with Social Security, and the number of households has grown by 4.1% to 135,000 units. In the case of income per household, the average currently stands at €30,700, up 13.7% in 2019.
Malaga also saw a record number of people in employment. The report indicates that the number of people registered with Social Security was 322,000 at the end of last year, up 17.5% in five years. Meanwhile, households have grown by 4.3% to 218,000 units in the Andalusian city; and the average household income has shot up by 18.5% to €31,612.
Seville is also on this list, with a 13.5% rise in contributors between 2019 and 2023, to 401,000. In that time, the number of households has increased by 1.8% to the current 226,000, while the average household income has reached €33,543, having risen by 14.1% compared to 2019.
Murcia is another of the provincial capitals with an unprecedented level of employment. According to the study, it had 245,000 people in work at the end of December, 12.9% more than five years ago, while the number of households has increased by 6.2% to 164,000. Household incomes improved by 16.4% to €34,700 on average.
The other capital city where the labour market is at an all-time high is Bilbao. In the Basque capital, the increase in Social Security registration was 7% in five years, reaching 173,000 workers in the city. In that time, the number of households has grown by 2.6%, with 149,000 units at present; and the average income has increased by 9.6%, with €38,355 per family.
Although they did not reach record highs, improved employment is also a reality in Barcelona, Valencia and Zaragoza. The Catalan capital, for example, had 1.2 million employed people at the end of 2023, increasing by 7.6% compared to 2019, despite being 0.7% below its record high. In its case, household creation remained stable, with a slight uptick of 0.3% in five years, standing at 668,000 in this second quarter of the year. What has shown greater vigour is the average household income, which has risen by 10.9% in five years, consolidating at €41,454.
Valencia, for its part, has also recorded a strong upturn in employment: it now has 445,000 people registered with Social Security, 16.3% more than five years ago, while the average household income has risen by 15.4%, reaching €35,463. Household creation, on the other hand, has risen by 2.4% in the same period to 320,000 in the city.
Zaragoza was the last provincial capital analysed in the report, and it did not record a record high in Social Security enrolment either, although there was a clear improvement in employment. According to the document, the Aragonese city has increased its Social Security contributors by 8.4% in five years, bringing the current figure to 315,000 workers. The average household income has increased more, with a rise of 11.7%, to over €35,500 on average; while household numbers have risen more moderately, by just 2.4% in five years, to 320,000.
Immigration tops home creation and drives housing demand in Spain
The demographic evolution in Spain places immigration as the main driver in household formation and the demand for housing. This was the opinion of Juan Antonio Módenes Cabrerizo, PhD in Geography at the Centre for Demographic Studies, during a conference held at the Madrid Real Estate Exhibition (SIMA).