Fotocasa: Rental Prices Soar by 11%+ in Madrid, Valencia & Málaga

20 November 2018 – Expansión

The rental market has reached cruising speed faster than usual in the main Spanish capitals. The new normal has become double-digit increases, which have been accumulating on a sustained basis now for several months.

Madrid, Valencia and Málaga are leading the trend. In Madrid, rental prices soared by 13.2% in October in YoY terms; meanwhile, in Valencia, they leapt by 13%; and in Málaga, they rose by 11.3%. They are closely followed by Santa Cruz de Tenerife, where rental prices increased by 10.2% in YoY terms. These rises contrast with the overall moderate increase in rental prices in Spain, which were up by just 2.7% on average in October, according to the latest data published by the online portal Fotocasa.

“The average price of rentals in Spain are continuing to rise, but at a much lower rate than they were a year ago, when we were seeing double-digit YoY increases” explains Beatriz Toribio, Head of Research at Fotocasa.

In fact, the 2.7% increase is so heavily influenced by the large capitals that if we eliminate the increases in Madrid, Valencia and Málaga, the market would register a decrease of 3.2%.

Even so, the data for October constitutes a recovery, after a YoY decrease of 4.2% in the third quarter, the most acute reduction since the third quarter of 2007.

The strong tensions in prices in the main capitals are striking”, said Toribio, “above all, taking into account that a large part of them mean that we have now exceeded the maximum prices recorded in 2007 and 2008”.

This sustained increase in prices in the rental market is mainly explained by strong demand. On the one hand, the increase in house (sales) prices in the major cities means that the proportion of people who are ending up renting is increasing – a change in trend that is also being influenced by the preferences of young people to rent. On the other hand, the dynamism of tourism in these cities, together with the appearance of new accommodation platforms, such as Airbnb, in an environment characterised by low interest rates, have made rental an attractive option for investors. That, taking into account the scarce supply available in cities such as Madrid, is pushing prices up.

By contrast, rental prices are falling in cities with less economic dynamism, many of which are located inland, with acute problems in terms of depopulation and ageing demographics. Such is the case of Huesca, where prices fell by 25.7% in October, followed by Vitoria, with a decrease of 23.1% and Soria (-21.5%).

Although the rental market is more elastic than the purchase market against possible macroeconomic shocks, a significant slowdown in economic growth could have a negative impact on the real estate market.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

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