18 July 2016 – Expansión
Over the last three years, the prices of most goods and services have remained stable, to the extent that many economists have come to fear that Spain will enter into a period of deflation. Nevertheless, in the midst of these “doldrums”, there is a market where prices have already started to pick up pace: the residential rental sector. According to the latest data from Fotocasa, residential rental prices rose at a rate of 4.8% YoY in June, just two tenths below the historical maximum, recorded in 2006, when the index was first compiled. (…).
As with everything, this market also reflects the two speeds that are being seen in other segments. In this way, prices grew by 15.7% in the Balearic Islands, but remained stable and even decreased in La Rioja, Extremadura and Castilla-La Mancha, reflecting the demographic and tourist pressures in one of the areas and the lack of strength in the others. After the islands, comes Murcia, where rental prices rose by 11.3%, followed by Cataluña (10.7%), Comunidad Valenciana (10.5%) and Madrid (9.9%). All of the other regions fall a long way behind, well below the average.
Something is changing in the rental market. “There is no longer a single market, but rather areas that vary significantly by district and even by street. For example, in Barcelona, rental prices have risen by more than 20% in several neighbourhoods: Gràcia, Sants and Ciutat Vella”, says Beatriz Toribio, Head of Research at Fotocasa. In addition, whilst before the highest rental price increases were seen in those cities with the highest economic growth, now prices are rising by the most in the most popular tourist destinations. That is because tourists are increasingly opting to stay in private accommodation instead of hotels, and increasingly more owners are putting their homes up for rent for this purpose, given that they offer higher returns.
Although this type of housing does not enter into Fotocasa’s calculations, the use of residential properties for this purpose significantly limits the supply of homes, which drives prices up. For example: rental prices rose by 7.1% in the capital of Valencia with respect to last year, but soared by 19.6% in Peñíscola, 21.6% in Gandía, 25.6% in Benidorm and 49% in Santa Pola. (…).
The major exception to this changing pattern in the Canary Islands, where rental prices grew by 3.8%, below the average. That rate of growth was in line with Andalucía (where prices rose by 4.3%, also driven by many towns along the coast), Navarra (where prices also rose by 3.8%), Cantabria and Galicia (3.5% in both cases). There were also significant price increases in Asturias (3.2%), Aragón (3%) and Castilla y León (2.4%).
Finally, prices remained stable or decreased in just four autonomous regions: País Vasco (where rental prices rose by 0.8%), Castilla-La Mancha (0.6%), Extremadura (where they remained stable) and La Rioja –where they decreased by -0.2%.
As a result of the price increases in the last year, Madrid and Cataluña have joined the league of autonomous communities where rents now cost more than €10/sqm, following the path set by País Vasco. These regions are followed by the Balearic Islands (€9.16/sqm) and then Navarra (€7.11/sqm). The cheapest rents are found in Castilla-La Mancha and Extremadura, at less than €5/sqm, followed by La Rioja, Murcia and Valencia (between €5/sqm and €6/sqm).
Original story: Expansión (by P. Cerezal)
Translation: Carmel Drake