The average price of home rentals in Spain will increase more than 10% in 2016
- Spanish rental homes are multi-family, measure less than 90sqm each and cost an average of €540
- There are currently 2.5 rental homes in the country for every 1,000 inhabitants
- Catalonia, the Community of Madrid and the Balearic Islands are the autonomous communities where rentals are the most profitable
Barcelona, 25 October 2016.- Servihabitat Trends, the research and market analysis platform spearheaded by Servihabitat, is publishing its report on the “Residential rental market in Spain”. The study, which was drawn up based on official sources, figures from the portfolio of rental properties managed by the servicer and the leading real estate portals, highlights the outstanding opportunity to consolidate rentals in Spain, which serves as an incentive for new owners of rental homes to enter the market.
Structural change in the sector in Spain
In recent years, the number of households that live in rental units in Spain paying rent at market prices has increased considerably, from 9.5% in 2005 to 13.1% in 2015. This upswing has meant that the balance between the homeowner market and the rental market in the country is becoming more similar to other European countries, and it has also meant a structural change primarily due to the economic situation in Spain in recent years. Factors like the increase in job mobility and new family models, among others, have also contributed to the change in the perception of rental homes among the younger generations. All of this means that of the more than 18.3 million primary homes in Spain in 2015, 22.7%, or almost 4.2 million, are occupied by renters. Furthermore, if we bear in mind the EU-28 countries, there are only 13 countries with a higher percentage of the population paying rent at market prices than the Spanish 12.7%, even though this recent evolution in homeowner occupancy vs. rental is not uniform among these countries. In this sense, Juan Carlos Álvarez, the Real Estate Business General Manager of Servihabitat, states that “currently, more than 40% of the new transactions we perform here at of Servihabitat are rentals, so we have to meet these needs and align with consumers’ interests. For this reason, our company has clearly been gearing more towards this market, especially in the past three years, when we have expanded our rental portfolio to nearly 60,000 units, making it the largest portfolio of its kind in Spain.
Multi-family, measuring less than 90sqm each and made up of single-parent families: this is the standard rental household in Spain
According to the study, more than half of the primary homes that are rented are located in buildings with 10 or more homes. Furthermore, the proportion of this kind of property is higher in multi-family households, as 27% of them rent. If we bear in mind the size, 73.5% of the rental homes measure less than 90sqm, and regarding the year they were built, 57.7% date from prior to 1981; that is, they are more than 35 years old.
In terms of the profile of the households who live in rental units in Spain, 37% are made up of single-parent families, that is, one adult with dependent children. This segment of the population is the one that has grown the most in the past 10 years. It is followed by single-person households (28.5% of which rent) and those with dependent children who live with more than two adults (23.9%), a segment that has also increased considerably.
Furthermore, the Spanish rental market has a large foreign demand. In fact, 13.9% of Servihabitat’s Network of partner agents (APIs) report that most of their rental transactions are with foreigners, particularly Moroccans, followed by British and Romanian.
More than 6 More than 6 rental homes in Spain for every 1,000 households
There are 114,500 rental homes on the Spanish market, which accounts for 10.4% of the real estate supply for sale. This volume is a scant 0.4% of the estimated housing stock in 2015 and means 2.5 homes for rent per 1,000 inhabitants or the equivalent of 6.2 rental properties for every 1,000 households.
By regions, the Community of Valencia, Castilla y León, Cantabria and Castilla-La Mancha have a larger supply of rental homes per inhabitant and per household than the Spanish average, as do the coastal provinces like Málaga, Cádiz and Alicante and cities with a large number of students, like Salamanca especially.
Forecasts of a more than 10% year-to-year increase in rental prices and profitability of 5.4%
Rental homes in Spain measuring between 80 and 90sqm cost an average of €540. The expected trend is for the increase that rental prices have been experiencing this year to continue, closing 2016 with a more than 10% increase. In autonomous communities like the Balearic Islands, the Community of Madrid, the Basque Country, Catalonia, the Canary Islands and Cantabria, the average rental price is higher than the Spanish average, and this upturn is expected to continue. The same upward trend has also been felt the most intensely in larger cities with a higher market volume, as well as in popular vacation spots.
The gross profitability of rental homes in Spain is 5.4%, with Catalonia, the Community of Madrid and the Balearic Islands exceeding the national average.
Given this framework, the residential rental market has an outstanding opportunity to consolidate more broadly and to become stable over time, although this requires a focus on innovation in the services offered by both landlords and tenants. The need to have a stable legal framework that facilitates transactions in this field is becoming increasingly important, as is the intervention of the public sector in initiatives that increase the promotion of publicly-subsidised rental homes and the adoption of fiscal measures to encourage residential rentals.
To see the report, please click on the following link: Residential rental market in Spain
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