The average gross profitability of rental homes in Spain grows 1.8% and stands at 5.7%
 Thursday, 24/10/2019

  • The average price of a rental home of between 80 and 90 sqm is around €800, about 12.7% more than a year ago
  • The available offer is reduced by more than 15% and represents 1.9 available homes per 1,000 people
  • On average, a home takes about 49 days to be rented in Spain

Barcelona, October 24, 2019.- Servihabitat Trends, the market research and analysis platform sponsored by Servihabitat, publishes its VI report on the "Residential rental market in Spain”. The study, retrieved from official sources, own data from the portfolio of rental properties managed by the servicer and from the main real estate portals, shows that the residential rental market continues in good health, although the trends point towards a moderation, mainly, in prices.

The Spanish population living in rental homes continues to grow and is close to the EU average, specially those people paying rent at market price
According to Eurostat data relating to 2018, the 23.7% of the Spanish population living in rental homes has increased from 22.9% in 2017. Spain is, together with Sweden and Denmark, the third most advanced country in this field. The number of cases in the rental system with rental price paid at market prices is increasing, which represents 65% of the total and is close to the EU-27 data.

The tenure regime by age shows that the population aged between 16 and 29 mostly prefers renting, in spite of the fact that those living in market-price rental homes has reduced from 48.9% of the total to 45.8%, according to National Institute of Statistics (INE) data. This is due, on the one hand, to the rent increase percentage rising at below the market price and, on the other, to the property. In addition, this has been a favorable year for young people seeking to own their own homes, due both to improvements in working conditions and the favorable financial conditions.

Profile of primary rented homes: multi-family and with average age of tenants 33 years
As pointed out by the Network of partner agents (APIs) of Servihabitat, the average age of rental home seekers is 33.1 years, decreasing slightly from 33.8 in 2018. Thus, the under 35 age group has gained weight, accounting for 74.4% of the total compared with 69.5% last year.

With respect to the characteristics of rental homes, 28% of the primary multi-family homes and 13.2% of single-family homes are rented, which amounts to 3.5 million homes and 780,000 respectively. Furthermore, while homes of less than 75 useful sqm remain the most widely available, the useful area of the rented homes has generally increased, given that those of less than 75 useful sqm account for 47.8% of the total, compared with 48.7% in 2017.

The time needed to rent a home is reduced to 49 days in Spain
The number of months needed to rent a home in Spain is 1.64 months or 49 days, a reduction from the 1.77 months of last year. In the Community of Madrid, this time is lower still (39 days) and in Andalusia, the Community of Valencia and Catalonia it is 50 days.

Rental housing offer in SpainThe offer has reduced by more than 15% due to market liquidity
The rental housing offer in 2019 has decreased by 16.1% with respect to the data of a year ago, which equates to more than 87,700 available homes. There are 1.9 homes available for every 1,000 inhabitants and 4.7 for every 1,000 households.

This absorption is due to the fact that we are facing a very agile market that presents itself as a good opportunity for investment thanks to ts rate of return.

Communities most affected by the lack of offers are Catalonia, the Community of Madrid, the Community of Valencia, Castilla-La Mancha and Castilla y León.

Even so, in absolute terms, Andalusia, Catalonia and the Community of Madrid have more choice, although the only communities increasing their offers compared to last year are the Canary Islands (34.6%) and La Rioja (23.3%).

Avarage home rental priceThe Community of Madrid, Balearic Islands and Basque Country: communities with higher rental prices
The average price of rental homes between 80 and 90 sqm in Spain is €800, an increase of 12.7% compared to one year ago. This confirms that rental prices are still rising nationally, although with more moderate increases than previously. Therefore based on the average, the prices are around €9.4 per sqm.

The Community of Madrid (€1,021), Balearic Islands (€953) and Basque Country (€911) have the highest prices, although prices have been contracted 16.3%, 18.5% and 5.1% respectively.

It is hoped that in the coming months, prices will remain stable in accordance with the 68% of the APIs interviewed.

Average profitability of home rentals in SpainThe profitability in the Community of Madrid for a rental home is higher than the national average of 5.7%
The average gross profitability for a rental home is 5.7%, 1.8% more than one year ago, with the Community of Madrid (5.8%) exceeding this average, followed by Catalonia (5.6%) and the Region of Murcia (5.5%).

By province, Valencia (6.1%), Toledo (5.9%), Seville (5.8%) and Madrid (5.8%) show higher profitability than the national average.

Evaluating the behavior of the indicators in the sector, we can conclude that the residential rental market in Spain is progressing at more moderate rates than in the last semester, especially with regard to prices. The existing offer is absorbed quickly and, in general, the market is functioning with liquidity.

The growth in the rental market against the property ownership continues to underpin the difficulty some homes have in increasing their income, lack of savings for being able to purchase their own homes for younger households or those with lower incomes, with renting considered as the primary residential choice for younger people and greater job mobility.

Regarding the offer, in spite of having reduced, the market will be enriched by a larger number of professionalized offers from large investors.

The growing number of homes which prefer renting is also pushing up prices, mainly in cities with a higher number of university educational and job opportunities, as well as in the main holiday markets.

Furthermore, from the point of view of the investor, Juan Carlos Álvarez, General Manager of Servihabitat's Real Estate Business, considers that the sector "is experiencing a paradigm shift. Two decades ago, the rental market depended mostly on small property owners. Now, a large part of the stock consists of large rental portfolios that have led to the appearance of professional managers. New investment opportunities have appeared with appealing returns, and the profile of the tenants has now changed, for instance with more emphasis on flexibility".

To view the report, please visit the following link: Residential rental market in Spain

About Servihabitat
Servihabitat is one of the major servicers for comprehensive management of mortgage and property development loan portfolios, as well as property assets. Its experience of 30 years in the market and the high volume of assets being managed consolidate the position of the company as an industry leader.

A highly qualified professional team and a first-party technology platform provide Servihabitat with an independent and differentiated operational methodolgy capable of meeting all the demands in the financial and property asset management cycle.

More information:
Helena Arnó (harno@tinkle.es / 600 591 801) o Teresa Batlle (tbatlle@tinkle.es / 662 312 879)