Price Rises Continue To Rock Spain’s Rental Home Sector
6 June 2017 – El Mundo
The housing market is trembling and not, like in the past, because of the high degree of sale and purchase activity. The residential sector in Spain is facing an unprecedented phenomenon: a boom (not a bubble) in the rental sector. In a short space of time, this residential regime has gone from being almost residual to accounting for more than 20% of the housing market. And that figure is rising. This leap is driving up prices, significantly. Above all in Madrid and Barcelona.
According to the experts, a change in the mentality of young people and employment mobility are the main factors driving this formula for accessing a home. (…).
Not since the 1960s has the percentage of rental properties been so high in Spain, but, despite the increase, the figure is still well below the levels seen in other European countries – which reach 50% in some places – although it is moving closer to the Eurozone average – 30%. (…).
The cornerstone of this growth in rental properties has been the spectacular boom in demand, which has come up against an unprofessionalised sector, with minimal supply owned, primarily, by individuals. The real estate portal Fotocasa now registers more searches for property rentals than it does for property purchases. The result of this imbalance? An earthquake in terms of prices. How long will this earthquake last? Where are its epicentres? What intensity will it reach? What measures should be taken to soften its effects? (…).
The latest evidence of the rental earthquake has come in the form of the Fotocasa’s price statistics for April, which show that the average rent in Spain rose by 10.2% in one year, to €8.04/m2/month. That cost takes the market back to its 2011 levels but it is still well below (-20.7%) the peaks of 2007 (€10.12/m2/month). (…).
“It is a question of supply and demand”, said Economist and Director of the Masters in Real Estate Development and Management Advisory at the Universidad de Barcelona (UB), Gonzalo Bernardos. “Demand is increasing due to the recovery. There are more jobs and, therefore, more families and young people as potential tenants. By contrast, the supply is decreasing (…)”. In his opinion, this situation will change when the banks start lending again en masse to families who earn less than €2,500/month. “From then on, maybe from 2018 onwards, the rental sector will suffer, as demand will transfer to the purchase market”, he said. (…).
Fotocasa has prepared a seismic map of the rental market. It reveals the evolution of rental prices by autonomous region. Prices decreased in YoY terms in Galicia only (in April) (by -0.7%), whilst they rose in all of the other regions, with marked rises in Cataluña (17%), Madrid and the Balearic Islands (12.1% in both). Together with the Canary Islands (11.9%), these regions are undoubtedly the large epicentres of the increase in rental prices.
“The increase in rental prices is happening across the whole country, but the strong average increase is due to Cataluña and Madrid”, said Beatriz Toribio, Head of Research at Fotocasa. “According to our Real Estate Index report for 2016-2017, these two regions account for 43% of the activity relating to demand”, she said.
In absolute terms, the most expensive rental prices are also in Cataluña, where the price per m2 stands at €11.96/month. In other words, a typical apartment measuring 90 m2 costs around €1,075/month. Next in the ranking, and still in the double digits, are Madrid (€11.36/m2/month), País Vasco (€10.59/m2/month) and Baleares (€10.05/m2/month). These values are even higher in the main municipalities.
Barcelona – the great tip of the iceberg
(…). In the city of Barcelona, the average rental price amounts to €15.14/m2/month. That amount is higher than the figures registered in Sant Cugat del Vallés (€13.61/m2/month) and Castelldefels (€13.58/m2/month), the next two most expensive towns for rental properties in Spain. In Madrid and San Sebastian, rental prices stand at €12.81/m2/month and €11.96/m2/month, respectively. (…).
The analyst at Fotocasa thinks that rental prices will regulate themselves over time. “We are still well below the peaks. The market is normalising”, she concludes. Meanwhile, Bernardos predicts that the rate of growth in rental prices will gradually calm down in Barcelona and Madrid. He forecasts price rises of 12%, 9% and 5%-6% over the next three years in the capital and of 8%, 5% and 3%-4% in Barcelona. (…).
Original story: El Mundo (by Jorge Salido Cobo)
Translation: Carmel Drake