Investment Funds And Listed Real Estate Companies Are Driving The Rebirth Of Rent In Spain

18/08/2014 – Expansión

Investors such as Blackstone, Hispania and Quabit are diving into this business, traditionally less developed in Spain, where they see an opportunity with mortgages being higher than rents.

The Spanish property market continues its process of reawakening after more than a few years in decline. According to a study carried out by Deloitte Real Estate, up to twenty Spanish provinces are in an advanced phase of recovery, compared with eight which showed a better position last year.

In this recovery there is a segment of the market which finally seems to be emerging in Spain: the business of the rental home. “Spain has many of the fundamentals necessary for the rental market to be developed over the next ten years: appropriate accessibility rations, homes on the market with no buyer, a high rate of unemployment and reachable rental prices,” explains Javier García-Mateo, Deloitte’s Real Estate director.

In the majority of provinces, the average price of rent is greater or practically the same as the average mortgage payment. “Only in six provinces is there no economic argument to justify renting instead of buying for the final user,” underlines the report. According to data from last year (2013), in cities such as Barcelona, the price of rent is around 972 euros per month compared with the average mortgage payment which is around 890 euros.

It is not the only element which points towards business opportunities in the rental market. According to this same report, the rental market is expected to evolve favourably in three out of every four provinces. “In 37 Spanish regions, the rental market should evolve favourably if the sale prices do not decrease significantly and immediately. Among these provinces, Toledo, Salamanca and Zaragoza are of particular note, say experts from Deloitte in their report.

Listed real estate companies (Socimis)
On top of the levelling out of prices, there are also improvements in the legislation affecting listed real estate companies (Socimis). Since the changes introduced at the end of 2012 in the regulations affecting Socimis a number of firms, who are obliged to use 80% of their assets for rent, have chosen this formula for their business. Among them is Hispania Real Socimi (subsidiary of the listed company Hispania Activos Inmobilarios), which has residential assets in its portfolio. The North American venture capital investment fund Blackstone has placed the 1,860 protected homes which it acquired last summer in a Socimi called Fidere.

The arrival of these large international investors, together with the growth of traditional operators and property companies, will allow the rental market, which would need another million homes to become as well equipped as the average market in European countries, to become more professional. “If we consider all the homes available in Spain, around 26 million of them, with the average rental percentage in Spain; according to this calculation, we have a deficit below the Europeans of one million rental homes,” explains García-Mateo.

Original article: Expansión

Translation: AURA REE