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Rental Prices Soar & Are Now Equivalent To The Minimum Wage

2 August 2017 – El Economista

Renting a holiday home for short periods of time has become fashionable. According to data from Exceltur, the association that represents 23 of the largest companies in the tourist sector, the stock of homes available for tourist use amounted to 1.7 million at the end of last year. In other words, there is currently one tourist home for every two regulated beds. This new business, which has always existed – but which is now experiencing a boom – is being criticised in the market at the moment, since holiday homes are being blamed for the rise in residential rental prices.

According to the real estate portal Idealista, “the rise in rental prices has nothing to do with the supply of accommodation for tourists given that that is static and there is a lot of rotation in the traditional rental market”. Moreover, Idealista adds another reason to distinguish the rise in traditional rental prices from the supply of holiday homes, since “the greatest increases in rents have been registered in those neighbourhoods that are least attractive to tourists”.

Therefore, for Fernando Encinar, the co-founder and Head of Research at Idealista, “the rise in rental prices is being driven, exclusively, by the improvement in employment”. Joseba Cortázar, PR Manager Iberia at HomeAway, shares this view: “There is really no evidence to suggest that tourist homes are driving up rental prices. Prices are rising in line with the evolution of the economy”.

Regulation

On the other hand, Gerard Marcet, founding partner at Laborde Marcet, says that “it is inevitable that tourist housing will have an inflationary effect on the rental sector in Spain if it is not properly regulated. If we do not take effective measures, it is almost impossible to control what each individual does in his or her home and whether or not he or she pays tax on the accommodation services he or she offers outside of the regulatory framework.

For this reason, rental prices are rising at double-digit rates in Spain’s major cities. In Barcelona, Madrid and San Sebastián, it is no longer possible to rent a property for less than €650-€700, which is basically the minimum wage”.

Solutions

Which solutions can be introduced to regulate this market? Joseba Cortázar says that “we need public-private collaboration between the platforms and associations in the sector to better understand the phenomenon and arrive at a consensus in terms of legal regulation, but we should not demonise the sector. We have to establish an ethical code of conduct for the various platforms to adopt”.

In this sense, Gerard Marcet thinks that “on the one hand, we need to approve unique, ambitious and effective regulation to put an end to this irregular practice and that the only thing that it does is to encourage a price war and the rise of the underground economy. On the other hand, we need to grow the stock of public housing to increase the supply of homes available for rent and, whereby, deflate prices in the market, allowing people access to homes at reasonable prices, given the salaries in Spain. Finally, in cities such as Barcelona, the government should unblock the situation that the hotel sector has been immersed in since the hotel moratorium was approved”.

Original story: El Economista (by Luzmelia Torres)

Translation: Carmel Drake