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Spaniards’ savings in pandemic: tips to avoid long-term losses

El ahorro de los espanoles en pandemia consejos para evitar perdidas a largo plazo - Spaniards' savings in pandemic: tips to avoid long-term losses

2020 has been a tough year at all levels. The world economy, and also the domestic ones, have suffered the consequences of the health crisis. However, the savings of Spaniards in the pandemic have been higher than in the immediately previous months.

According to Intrum's European Consumer Payments Report, 16% have saved more than usual, a figure higher than the European average, which increased its savings by 14%. In fact, data from the Bank of Spain indicate that in January 2021, Spanish household savings reached 917,500 million euros, 65,600 million more than just before the pandemic got declared.

Why have Spanish savings increased during the pandemic?

There are several reasons for this saving. On the one hand, the confinement and restrictions on mobility imposed over the last year have led to a forced drop in spending on everything related to leisure: restaurants, cinema, gyms, travel, etc. And this drop in consumption inevitably translates into an increase in savings rates.

On the other hand, the uncertainty has created a pent-up demand, i.e. many Spaniards have decided to postpone their purchases. That's a logical response in times of crisis when caution prevails, and spending is much more controlled to deal with possible unforeseen events.

And forecasts suggest that in 2021 the trend will not change too much, and Spanish savings during the pandemic will continue to grow. It will do so, at least until the economic and health situation makes it possible to see the end of the tunnel.

Channelling savings to avoid future losses

Given these circumstances, the initial tendency is usually not to move savings until we are sure of the economy's evolution. However, in the medium and long term, this investment inactivity means losses. Keeping money in bank deposits or investing it in safe low-yielding products will hardly make savings grow. And not all small savers venture into riskier options, even if they are more profitable.

How to act? In times of crisis, the real estate market has always been considered a safe-haven asset. Moreover, these are periods in which prices adjust, so housing represents a good investment opportunity.

Forecasts suggest that by 2021 prices in the real estate market could fall by up to 10%. And we have to count on low-interest rates too. Therefore, it is the right time to consider buying a home.

If our goal is not the habitual dwelling but rather an investment to obtain profitability, we shall keep in mind other factors. The most important of these is that the gross rental yield in Spain averages 7.9%, according to the latest study by the Sociedad de Tasación (Valuation Society). In other words, this is a significant return, and the investment risk is low.

So, investing in housing is an excellent opportunity to provide an outlet to obtain a return for the Spaniards' savings during the pandemic. Waiting may mean losing out on profits.

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