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The birth rate: New and surprising indicator of property prices

Finding out more about house price indicators is increasingly becoming a complicated task. This is due to the situation that the property market is experiencing right now. However, as is often the case, the solutions to this type of problem are found in the least expected places. This is clear when we verify that the birth rate is currently one of the most effective indicators existing today.

Why does the birth rate serve as an indicator of the general economic situation?

There are many reasons given by the study carried out by NBER, which is the abbreviation of 'National Bureau of Economic Research' or, as it is translated from Spanish into English, 'State Agency of Economic Research, which is the basis for the statement given about the birth rate and the price of property.

Specifically, this study is based on an existing correlation between the reduction in the rate of births in women in those periods that immediately precede a recession, as well as an increase in those that happen shortly before a revitalisation of the economy. 

This factor may seem obvious or simply an anecdotal fact that goes no further. However, based on the last 30 years' data and statistics, the birth rate of women has predicted all the economic crises that occurred during that time with greater reliability than any other economic indicator.

The birth rate also serves to predict fluctuations in the price of property

We have already referred to the way in which the rate of births in Spain and the rest of the world can serve to predict an upcoming recession or a period of growth in economic terms, which will serve to establish the basis of the topic that we are concerned about. This is none other than the relationship between this indicator and the price of property.

However, what does an increase in the birth rate indicate with respect to the property market? Firstly, when the birth rate starts to increase, it is usually synonymous with an increase in the number of homes sold. This is mainly due to the fact that at the time of becoming parents, couples tend to seek greater financial security and, therefore, decide to make a move and buy a property.

It must be said that this process is not usually immediate and takes a while for the new parents to be able to move into their own homes. For example, from the moment in which an upward curve in the birth rate can begin to be appreciated, it can take around a year until we see an increase in the value of the property and in the number of sales that is indicative.

In addition, the increase in the birth rate is synonymous with economic recovery for another very simple reason. In times of instability and insecurity, families tend to be much more conservative and opt to put aside their dreams of becoming a mother and father until the economic forecasts are better.



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The rent prices also go up

If an increase in the rate of births within the population of a city is detected, a great idea is to invest in large flats that are located close to schools. Just as it has been proven in previous situations, these types of properties are the most sought by couples who are close to becoming parents or are deciding to become parents in the near future.

However, in a city like Madrid where prices are already quite high, many couples opt for renting a property until they have enough savings to buy a home with. This is the reason why the demand for larger flats increases. They seek large flats in the vicinity of educational centres.

What is the size of the most sought after flats in Madrid for couples who are expecting a baby?


By going with the data of the current property market and those reported by couples who have bought or rented as they are in a position to wait for a baby, we can say that the size of the flats that have a higher demand within the city of Madrid and its province is between 60 and 80 square metres with two bedrooms. In general, those who seek such properties are people who are going to have their first child and who need something bigger than the flat they currently live in.

However, other conclusions can be drawn from the study of the data. For example, following the two-bedroom flats, the next most popular type of property within the capital of Spain for couples who are expecting a child is a terraced house in the vicinity. This also indicates that the increase in the birth rate goes hand in hand with an increase in people's purchasing power.

We can not forget to say that the number of off-plan properties is gaining more and more prominence among these types of buyers, especially if they already own a home or if they are in a good financial situation to buy a home. After all, it is a safe and profitable investment since the price of the off-plan property (once built to completion) can go up to 20 per cent higher than the one that's already completed and ready to move into.




Are banks obliged to granting mortgages?

The answer is yes. After several years in which banks in general were very reluctant to grant mortgages, it has been a couple of years since they seem to have let go of their reluctance to lend money again. Although mortgages are not being given at the same rate as 10 or 15 years ago or with the same criteria, the fact is that it is now becoming easier to obtain a mortgage, especially if you have a fixed salary and some savings.

In fact, more and more banks have opted to offer borrowers more than 80 per cent loan to value subject to the valuation. This is certainly a true advantage for the buyers. 

In summary, the birth rate has been established as one of the best indicators to predict fluctuations in the price of property and the future of the economy as a whole. This means when the birth rates rise, we can mark the end of the recession and look forward to a period of economic growth that leads to the increase in the number of households, while on the other hand when the birth rate descends, the opposite will happen. Therefore, it is not surprising that more and more investors are taking this factor into account when spending their money on a property.




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