Two and a half months after the approval of the Housing law, the market is seeing unwanted effects, either because some of the measures are not being effective, or because some already existing trends have not been resolved, which is causing that there is little rental supply and an increase in prices. The most harmed by this situation are the vulnerable, families who continue to have no access to affordable properties and, therefore, see their expectations for the future diminished.
Housing was the main economic issue during the campaign for the municipal and regional elections on 28 May. The Central Government, in addition to giving the go-ahead to the first state law after two years of negotiations, announced a block of initiatives to promote the supply of social housing and solve the housing deficit, which is particularly severe in cities like Barcelona and Madrid. Almost a quarter later, the market situation is complex. There is less stock of rental housing on offer and prices are at their highest. The average price of apartments for rent today is 11.69 euros per square meter; in May 2022 it was 10.89 euros/m2, according to data from Fotocasa. Idealista, on the other hand, puts the increase at 9.3% in the first half of 2023.
The problem is not that the owners are violating the obligations of the law. It is an explosive cocktail that mixes the fact that the autonomous communities governed by the PP, up to eleven after 28-M, will not apply the rule, with a market that is avoiding the limitations in force or potentially withdrawing homes from rent to pass those to other more profitable or “safe” modalities.
Industry experts identify five trends in the rental market in recent months. First, a transfer of homes that were rented and are now for sale. According to Fotocasa’s figures for published advertisements, the offer has been reduced in Madrid by nearly 15%, and in Barcelona, ??by 20%, this year. Landlords admit they decide to divest from real estate for a variety of reasons, and profitability is one reason on the upside in 2023.
The real estate market is also experiencing an increase in seasonal rentals, a legal modality that seeks to avoid price limitations. “The owners rent the properties for eleven months, it’s a loophole that quite a few are falling through”, explains Emiliano Bermúdez, deputy director of Donpiso. There is also a transition from residential to tourist rentals that, although it is difficult to quantify at the moment, all portals and real estate experts consulted have detected it. Fotocasa explains that by 2023 the number of buyers interested in opting for holiday rentals will have doubled. Profitability is again the main reason. The bet on shared flats is the fourth trend identified by the sector: private individuals who decide to remove properties from traditional rental and allocate them to leases for students, for example. In Barcelona and the capital, this modality has sent prices skyrocketing.
Investors talk about a housing law that generates “legal uncertainty”. They point out that the situation in Catalonia (where the Parliament will vote if it partially appeals the state rule before the Constitutional Court after the Council of Statutory Guarantees determined that it encroaches on some autonomous powers) is even more delicate, because it is the only territory with the provision to apply all the precepts of the state law.
The Association of APCE Developers explains that, in addition, there is a reduction in the rate of construction of homes in the autonomy. In the first quarter alone, the latest data available, construction starts fell by 9.2% year-on-year. “The promoters prefer to bet on safer places”, points out Arantxa Goenaga, partner of the law firm Círculo Legal. “The Housing Act has well-intentioned measures that end up generating unwanted effects, and vulnerable groups are the main victims”, says a manager of one of the main developers.
The problem of renting in Spain has no solution in sight. The formulas to promote an affordable housing stock announced by the central government have not made progress. Market professionals agree to point out that their bet would be to modify the regulations to grant more guarantees to the owner. Without legal certainty, there will be no investments and the offer will remain insufficient, they conclude.
