Nicholas Mead

I’m still in the process of putting more articles online and so the published archive is slowly growing. In the meantime, here’s one from last year that looked at the increasing cost of living in Barcelona. Note that is was written just before the world financial crisis hit and the weakening of the Euro.

Originally Published: March 2009

Anyone who’s lived any length of time in Barcelona can testify to the huge increase in the cost of living over the past few decades. The Olympics, the introduction of the Euro and the advent of low-cost mass tourism have all helped transform Barcelona from simply a Mediterranean port into a glitzy economic powerhouse. By international standards though, Barcelona has remained a relatively cheap destination. Even up to less than a year ago, neither Barcelona nor Madrid were ranked amongst the world’s most expensive cities. However, a recent cost of living study found that this year, for the first time, both cities fall within the top 50. According to the study by Mercer Human Resource Consulting, Madrid ranks 26th with Barcelona following close behind in 31st place – more expensive than Munich, Brussels and even Los Angeles.

Since this particular study took New York as it’s base, some of this dramatic change can be explained by the weakness of the dollar against the Euro. “There have been some significant changes in the rankings since last year primarily due to exchange rate fluctuations – in particular, the weakening of the US Dollar and strengthening of the Euro,” says study consultant Rebecca Powers. However, such a dramatic change cannot be explained by exchange rates alone and many companies use the study as a gauge when deciding where in the world to relocate employees. “As companies continue to send employees on expatriate assignments, they closely monitor changes in the cost of living to gauge which destination is going to be the most cost effective,” adds Powers. Obviously, the higher that cost is, the less companies are going to see Barcelona as the bargain it once was.

The real driver behind this increase has been the cost of housing. The Mercer study estimated that the average cost of an unfurnished flat in Barcelona is now between €1,400 – €1,500. Meanwhile house prices have exploded in recent years. According to property portal The Property Finders, prices in Spain have tripled within the past ten years. In the case of Barcelona, the website states, “While the rate of increase is slowing down, a typical new 99m2, 3 bedroom apartment now costs in excess of €600.000 – 9% more than in 2005 and double the 2000 price.” The average house price in Barcelona is now a third above the national average – almost €5,000 per square metre – although prices are finally slowing down. Property Finders predict growth of around, “6–7% for 2007, decreasing to 3-4% for 2008 and in line with inflation until around 2010. This makes sense as the cycle from top to bottom to top again seems to be around 15 years.”

According to property portal The Property Finders, property prices in Spain have tripled within the past ten years.

A separate study by Deloitte highlighted just how much these huge increases are affecting the average Spaniard. The research found that the traditional summer hiatus, when practically all of Spain leaves the cities, is under threat this year due to increasingly high mortgage payments. Over two-thirds of Spaniards say they been severely affected by interest-rate rises, with 35 percent saying that they have had to take measures to save money – the majority choosing to sacrifice their summer holidays as a way to cut costs. In the case of young people, the situation is even worse. Another recent study by the Observatorio Joven de Vivienda en España found that on average, almost 70% of young people’s salary goes towards paying for housing between 30-40 square metres. Even the UN has warned Spain that the government needs to step in before the situation gets anymore serious. UN envoy Miloon Kothari warned press in June that, “The main problem with housing in Spain is that it is not affordable, with a considerable proportion of the population spending over 40 percent of their salary on mortgage repayments.” These rising costs have been exasperated by foreigners, particularly Northern Europeans, buying second homes here. A study by Barclays Bank claims that more than 50% of second home owners in Spain are foreigners mainly Brits followed by Germans and the French. It also found that one in every four newly built home in Spain is purchased by a foreigner, many of which are around Barcelona and the Costa Brava.

Of course, this crisis has been in the making for several years. Many residents trace the start of the first small rises back to the early 1990’s. “In my experience, the 1992 Olympics put Barcelona on the map and so it was no longer the well kept secret I had enjoyed since 1986,” says English resident Simon Davies. “Without doubt, the subsequent arrival of more tourists from countries where salaries are higher and currencies are stronger encouraged prices to be hiked up.” It was however the introduction of the Euro in 1999 that most pinpoint as the moment when prices really started to shoot through the roof. “The turning point in terms of Barcelona getting really expensive was definitely the introduction of the Euro,” adds Davies. “There’s something in the pysche of going from large units to smaller units whereby the new prices in smaller figures don’t seem expensive. Then the complicated exchange rate didn’t help – which encouraged unscrupulous increases.”

This change to Euro was particularly noticeable as regards the cost of everyday items. Many residents recall the pre-Euro days when a cup of coffee cost no more than a few hundred pesetas (less than half a Euro) and can now cost upwards of €2 in the more touristy areas. However, president of the Gremio de Restaurantes de Barcelona, Gaietà Farràs, says the costs of the city’s bars and restaurants are, “Still some of the lowest of the major European cities and the value for money still remains very high.” He concedes however that, “It is the Euro that has been responsible for price rises in recent years.”

The intrroduction of the Euro saw sharp increases in Barcelona's cost of living.

Part of the problem is that Barcelona has simply been a victim of it’s own success. Investment in the Olympics rejuvenated the once dour port and the installation of a man-made beach has given the city much more tourist appeal. The subsequent discovery of Barcelona on the international map has left magazines ranging from Newsweek to Wallpaper clamouring to declare Barcelona the “coolest” city in Europe. Davies adds, “I think it’s a general fashion-conscious glamorous bandwagon – Barcelona has become an ‘in’ place for the last few years. This has attracted a massive influx of people – everything from tourists to trade fairs.” Tourism in particular has certainly seen a massive increase. The Barcelona Tourist Board estimates that almost 30 million people will visit this year – almost a 40% increase from 2000. Trade Fairs have also brought huge amounts of money into the city. The Fira de Barcelona, the main exhibition centre, hosts 75% of Spain’s trade fairs with an estimated 3.5 million visitors last year.

How much longer residents will tolerate this escalating state of affairs remains to be seen but with youth movements emerging such as “No tendras casa en tu puta vida” (You’ll never be able to afford a home in your f****** life) it seems the existing situation has already gone too far for some.