The normalization of the rental market is neither seen nor expected, according to experts

The rental of housing is experiencing a moment of great uncertainty with prices touching historical highs, according to data from idealista, in the face of an increasing demand against a supply of flats for rent that is increasingly reduced for reasons such as the decline of small investors or the uncertainty created by the entry into force of the Housing Law.

The experts consulted by idealista / news affirm that the recovery of the rental market, in a scenario where prices normalize and the offer is able to adapt to the demand of young people and all types of families is not seen, nor is it expected in the short or medium term.

"The rental market is broken, there is not enough supply to absorb the current demand for rental living," says Anna Puigdevall, treasurer of FIABCI Spain. Emiliano Bermúdez, deputy general manager of donpiso, maintains this line of opinion, "the rental market does not have a solution right now, nor is it expected. It is a very stressed market. It is a market that has a structural problem that has to do with demand and supply."

For Daniel del Pozo, CEO of idealista / data, "the worrying shortage of supply, both for sale and for rent, is one of the factors that is most impacting house prices. In the last 15 years, a good policy of spatial planning or urban regeneration that responds to current needs has not been followed."

"There is a perfect breeding ground for us to find the highest prices throughout the year," they point out from Alquiler Seguro. Its president, Antonio Carroza, comments that the rise of the Euribor and the high costs of mortgages also affect rents. On the one hand, "the high cost of mortgages favors, in general, that renting becomes the only possible option that many people have to access a home", while "the rise of the Euribor also affects the owners, because those with mortgages will offer their rents at a higher price to be able to face the rise of these".

Concern about the contrary effects that the Housing Law is causing.

Rental prices have not stopped growing since the end of the crisis due to the coronavirus pandemic, and during 2023 they have peaked until August. In September, prices reached 11.8 euros / m2 on average per month, just 1.1% below the maximum of the historical series of idealista, since the real estate marketplace of southern Europe makes its statistics in 2007.

"In big cities, a tenant with an average salary cannot pay rent at the current price, which is already above 1,000 or 1,200 euros. In many neighborhoods, especially in the most central ones, the offer has disappeared and there are fewer and fewer in peripheral areas, "adds real estate consultant Eduardo Molet.

"In Barcelona, the price control established by the Generalitat already meant a break between supply and demand, from which we have not yet recovered and we already have new limits on rental prices, which will once again pose tensions in the residential rental market", said Anna Puigdevall, from FIABCI Spain.

The Catalan government, while going to the Constitutional Court to denounce the invasion of powers of the Housing Law, finalizes the procedures to  apply the areas of stressed residential market, which will limit rental prices in 140 Catalan municipalities.

From Alquiler Seguro they highlight that the average prices will reach 900 euros per month throughout Spain, far from the average evolution of prices in the years prior to the pandemic, where they do not exceed 800 euros per month.

Experts point to the significant loss of the supply of flats in the market to explain the current price tension, which most attribute to 'perverse' effects of the Housing Law such as the change of use of traditional rental housing to other types of rentals, such as room rentals or seasonal leases.

"Some of these forms of rental are legal, but others are not, since, if the purpose with which the tenant is going to use the rented space is to reside habitually with a vocation of permanence, and this has the necessary conditions to be habitable, it is a housing lease,  although the denomination that is given in the contract is another, "said the general director of the Rental Negotiation Agency (ANA), José Ramón Zurdo.

Others have moved to tourist rental or have directly taken their apartments out of the rental market and have decided to put the property up for sale, given the legal uncertainty that has fueled the implementation of the Housing Law, such as the declaration of stressed rental areas, The experts specify.

Last July, the Tecnocasa Group and the Universitat Pompeu Fabra (UPF) of Barcelona presented a report on the impact of the Housing Law on the market in which it stated that the rental offer in Spain could be reduced by 11.7% due to the   changes introduced by this new regulation, This would result in the disappearance of some 100,000 properties that are currently rented.

Molet, for his part, emphasizes that behind the new Housing Law there is a vision that in the medium term wants to encourage the creation of certain currents of opinion. "It seeks that society accepts expropriations as a lesser evil, and for this they first have to leave thousands of vulnerable families homeless who will not be able to access it with the current prices of rent due to low supply."

Solutions won't come overnight

Questioned about what would be the steps to follow to improve the current situation of the rental market and end this price tension, experts see that there are no short-term solutions, but that mechanisms must already be put in place to tackle an endemic problem that will harm the social and economic fabric of Spain, such as the emancipation of people.

From donpiso they are categorical, "in the rental market in Spain, the only solution it has is not the intervention of prices or anything like this, that this what contributes is that there is less supply, but that there is an effective and accurate and rigorous policy by the Administrations and public and private actors to generate a greater volume of rental properties", specifies Emiliano Bermúdez.

And it gives as an example the development of public-private promotions on land of the Administrations to build buildings for rent, which help increase the offer and relax prices, especially for young people and the most disadvantaged families.

Anna Puigdevall, from FIABCI Spain, adds the possibility that municipalities can speed up the changes of use of many offices and premises, which are now in disuse, and become homes. "Another solution is the increase of other housing solutions such as 'coliving', depending on the needs of each one," he specifies.

Recently, the General Council of the Official Colleges of Real Estate Agents of Spain (Coapi) has asked in an open letter to the acting President of the Government, Pedro Sánchez, that the investment of the State that supports the  Housing Plans is 0.6% of GDP, that is, 8,000 million euros.

The need to increase the public stock of rental housing is imperative, although all this will require large agreements between Administrations to carry out its construction. The public housing stock in Spain does not exceed 2% of the total housing in our country, when the European average is 9%. Hence, the Government Plan to raise 184,000 units in the coming years.

Follow all the real estate information and the latest reports in our daily and weekly newsletter.