The price of rental property in Spain, which already showed a strong upward trend in 2022, will continue to rise in the coming months. That is the prediction of experts who point to a greater imbalance between supply and demand to explain the increases expected for this year.
According to property experts, the decline in the number of rental properties and the rise in mortgage rates will push up prices in 2023. The price rise comes on top of last year’s price increases, which exceeded 20% in cities such as Barcelona, Valencia and Málaga.
The difficulties in buying a home, as a result of families’ loss of purchasing power due to the rise in inflation and the increase in financing costs, will cause many people who had been thinking of buying a home to postpone the decision. This, they say, will lead to an increase in demand for rental housing. Adding to this, the reduction in supply, which has been recorded since the end of the pandemic, still shows no signs of reversing.
Supply of rental housing declines
The stock of homes available for rent fell to 25% last year, according to data from real estate portal Idealista. A decline it attributes to uncertainty, both about recovering homes in case of default and the impact of measures introduced or announced by the executive and regional governments. One example is the price cap in problem neighbourhoods included in the new housing law. These measures ‘are not conducive to the appearance of new supply on the market, but rather contribute to its disappearance, argues Idealista.
Rent increase limited to 2%
On the other hand, the entry into force of the restriction of rent increases to 2%, approved by the government last spring as part of the anti-crisis measures and extended this year, is the cause of the increases in 2022, according to rental platform Fotocasa. As stated by the company, since last April prices have regained all that was lost during the covid crisis, rising by more than 20% in cities such as Barcelona (the most expensive area to rent a house) or Valencia, and by 27% in Malaga.
‘The rental market has become tense due to the shortage of supply, causing the main Spanish cities and provincial capitals to reach record prices,’ said Maria Matos, director of research and spokesperson for Fotocasa. According to Fotocasa’s scenario, rents could rise by 5% or more by 2023.
Idealista also predicts a rise in prices during the year, unless the appearance of new supply on the market is encouraged or the loss of household purchasing power reduces tenants’ ability to pay and leads to a price freeze in certain areas.
Average price rise of over 8%
This year’s price increases come on top of those in 2022, in which prices have already risen by an average of 8.4% to €11.40 per square metre per month, according to Idealista. A more detailed analysis of provincial capitals shows that in 48 of them, rents at the beginning of the year were higher than the year before. In 32 cases, the increase was higher than general inflation, which stood at 5.8%, according to INE data. Moreover, 20 cities recorded the highest prices in the property portal’s historical series, dating back to 2007.
Apart from Mediterranean cities, rent increases were significant in Alicante, where rents rose 23%, and in Girona, where increases of more than 19% were recorded. In addition, Idealista points to increases in Ourense (15.9%), Teruel (13.8%), Palma (11.9%), Jaén (11.4%) and Madrid (11.2%).
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