Have the edges of homeownership in Spain proved to be resilient after the global financial crisis?

Abstract

The direct effect that an exogenous shock like the global financial crisis (GFC) had on the border between one form of tenure and another is particularly interesting in countries were owner-occupancy predominates. Right before the GFC, Spain was experiencing a major housing price bubble, allowing great expectations on housing equity gains together with extremely high numbers of mortgage-indebted households. The GFC represented a major threat for those households at the edges as their financial fragility increased. The aim of this paper is to identify why the edges of ownership in Spain came to be so precarious after the GFC and to assess how resilience is improved (considering both vulnerable households affected by the crisis and those that may be affected later) by securing the future of the edges of homeownership and reducing the volatility observed in an ownership-centred housing market. We will use the MDSR (Mortgage Debt Service Ratio) as an indicator of the higher vulnerability of those on the edges of homeownership. Looking at the consequences at the edges of the GFC in a home-ownership dominated market will provide the arguments for drawing up policies and actions for a new long- term tenure scenario in Spain