MARKET September 13, 2018

Rental Market in Spain

Rental Market in Spain

With a boost in the Spanish economy since the recession and the property marketing recovering to 2007 levels, more and more house owners are putting their properties on the market having rented them out throughout the market slump. Consequently, however, this leads to a decline in supply and increase in demand and therefore driving prices up in many parts of the country, as proven by the 18% rental price increase in the last 4 years.
Barcelona and Madrid, in particular, are facing record highs for rental prices, and the average rental price throughout 2017 was 8.8% from the previous year, now totalling 8.15€ per square metre on average across the country. Cataluña, however, saw rents increase by 10.2% to 12.39€ per square metre, and inMadrid, the average rental price per square metre hit 11.43€ with an increase of 6.3% from the previous year.
That said, the most recent statistics produced by Idealista, a leading property portal, show that Madrid beats Barcelona in terms of profitability as Madrid has a rental yield of 5.4% and Barcelona of only 4.9%. This is way below the nation’s top of 8.1% in Gran Canaria, but still higher than the north of Spain where yields reach as low as 4.2% in San Sebastian, for example.
Illegal subletting is rife in Spain and is having its own effect on the rental market. For example, Airbnb which was founded in 2008, has become a very important part of tourism in today’s world. Typically, flats are rented at market value, and then the tenant sublets the property – perhaps through Airbnb or other similar mediums – to earn a profit. Not only does this limit the amount of stock available for locals, it in turn raises rental prices and upsets locals.
Cities in Spain are working to counteract this and are enforcing different rules in different municipalities. Barcelona has its own enforcement team to ensure that the sublessors are licenced (many of which are not), Madrid is restricting the number of buildings in the city centre that can be rented, and tourist apartments will have to have a separate entrance to that of the locals, which is predicted to reduce the number of apartments rented by about 95%.

Valencia is limiting short-term rental apartments to just ground and first floors, to preserve the sea views for the locals, and Palma de Mallorca has voted for a ban of almost all short-term holiday rental platforms.
The ultimate objective of these restrictions is to detract tourists from residential areas which will enable house prices to grow at a controllable rate, and thus help to level out the supply and demand. Spain is not the only place to be introducing such forces, however, as other cities across the globe like New York, Amsterdam and Reykjavik are also placing heavy restrictions on Airbnb and its competitors.
The number of people renting homes in Spain has increased in the last decade with 22.2% of the population renting, and of these, 69.8% are from 26 to 35 year olds. This inevitably shows that the rental market in Spain works differently to the sales market. As the market crashed and sales decreased, the rental market picked up as locals tried to find somewhere to live.

Now, as the sales market is accelerating and jobs are more available, people are trying to buy and sell 
property again as opposed to renting it which is likely to lead to a lack of supply and prices to increase for rentals in the future.

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