Spain’s €2.5bn Help to Buy scheme provides insufficient guarantees to lenders and is failing to improve affordability for young buyers and families, market experts warned.
Local developers told IPE Real Assets the scheme is intrinsically flawed, as mortgages must be signed before a state guarantee is requested, leaving banks to shoulder 100% of the initial risk.
“Banks are asked to put the money upfront, and only afterwards do they find out whether the ICO [Official Credit Institute] will approve the guarantee,” said one property investor who wished to remain anonymous.
Only the Region of Madrid is operating differently, by providing state-guaranteed escrow accounts, he adds.
This is the main reason why the Community of Madrid represents more than 90% of the loans issued so far under the Help to Buy scheme, while other regions are virtually non-existent. Another limitation is that the scheme applies only to existing homes and not to new builds. “The scheme has had little impact on the housing market so far,” said José Cravo, chief investor relations officer at Spain’s largest development company Neinor.
The company had welcomed the incentives, arguing they could help expand much-needed housing supply across the country.
Spain’s Help to Buy programme was launched in February 2024 to tackle housing affordability by reducing down-payment requirements and improving access to home ownership for young Spaniards.
It involves a €2.5bn ICO guarantee for first-time buyers under 35 and families, covering up to 20% to 25% of a mortgage. By the end of September this year, local banks had signed just 7,887 mortgages backed by the public guarantee, equivalent to €196m — only 7.8% of the funds allocated to the scheme.
The programme’s limited take-up comes as Spain continues to grapple with a worsening housing crisis. The country needs around 500,000 new homes to address the current housing deficit, according to the Bank of Spain. This would require building between 175,000 and 200,000 homes per year over the next five years to meet projected demand, compared to about 100,000 that were delivered in 2024.
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