Destination Services — Spain
According to the experts, the decline in the rental housing stock, together with the rise in inflation and the increase in mortgage financing costs, will continue driving prices up in 2023, in some areas, there could currently be an overpricing crisis, in 2022 prices peaked 3 times, in 2023 each month until March it has exceeded the previous one, more than 7.9% YoY (march 22/23) ¬ 9% Madrid, 11% Barcelona, +19,7% Balearics.
The long-term rental market is registering a constant drop in the number of available rentals, supply of rental housing has decreased by ~30%.
Offer
The long-term rental market is registering a constant drop in the number of available rentals, supply of rental housing has decreased by ~30%. Key factors include the return of tourists and seasonal rentals, and the poor supply of social and public housing that represents only 2.5% of the total rental stock.
Rental market regulations, are probably the most relevant challenge before the end of the year with the potential approval of the Housing Law for long-term rents. On March 2022 the Council of Ministers approved a new decree of anti-crisis measures, which allowed a 2% limit to the rent increase in current contracts rents, decree extended now until Dec 23. Apparently, the Housing Law that is still under negotiation would raise the rent increase limit to a 3% maximum, but experts agree that this approach will mean a migration to the short-term market or to the black market,
Squatting has become a headache for owners in Spain, Catalonia has slightly over 42% of all squatted homes in Spain, due to this some owners have taken their homes off the market, and others instead require more documentation than ever before for the tenant to prove their creditworthiness, such as the rent-to-income ratio of 30-35%, rental non-payment insurance, employment compensation/verification letter (EVL), 3 to 6 payslips and even a previous landlord reference letter.
Demand
In parallel, the demand for rental housing continues to increase. Young people and families who currently can no longer access financing to buy a home, now focus on renting. The increase in foreigners’ demand for housing, both from the growing number of “digital nomads” and talent recruited by multinationals & startups, adds pressure to an already stressed rental market, where in cities like Barcelona, real estate agents report that this type of applicant has tripled. Due to the rise in rents, part of the demand in certain capitals is shifting to the outskirts, increasing the price and the pressure in the neighboring municipalities.
Current scenario
Although new alternative formulas to traditional rentals are emerging, such as corporate rental “Built to Rent” (BTR) and Coliving, it is still a landlord’s market with almost total control over the course of the rental process, hence it is becoming more frequent to schedule ad hoc visits, not to lose the few options available. Some properties only offer open days to visit, having to wait in line, and additionally, the best quality/price apartments remain available for only a few hours. It is highly recommended to prepare a detailed dossier of the candidate, due to the demanding requirements of the landlords, who can choose between different applicants.
How Santa Fe can assist you:
Please take into consideration that the above information is in accordance with current legislation, but Santa Fe can investigate all the different cases and can offer the best and compliant advice.
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