Rental prices: have they peaked?

Living in Spain for rent is the only option for many. The inability to save leaves many people without property due to the high cost of entry – usually around 20% of the total price. If you can’t get past this hurdle and the rent goes up, there’s probably no turning back. And keep in mind that rent is often higher than paying a mortgage. According to data from iAhorro, renting a house specifically costs an average of 1,067 euros per month, while the mortgage payment is estimated at 673.33 euros. In fact, there is no autonomy in Spain, where renting is more profitable than buying.

The fact is that both those who resort to this way of life in order to be more mobile or not get into debt, and those who are forced into it, increasingly devote more and more money to the roof that houses them. Three out of every ten euros earned already go to rent, touching the limit of healthy finances. Last year, the percentage of Hispanic income allocated to rent payments rose across the region, from 26.4% in the third quarter of 2021 to 29.4% in the same period this year.

The effects of the pandemic in the rental market, which temporarily reduced costs, are over. During the quarantine months, there has been a surge in supply due to flights to the outskirts of cities, the relocation of holiday homes to traditional homes, or the shortage of students in metropolitan areas. But little or nothing remained of this movement.

Inflation, which galloped at 7.3% in October, increases in interest rates and economic recession forecasts inflate prices. Even the 2% increase in leases, approved by the Government in March as a containment measure to mitigate the effects of the war, could not stop the blow. Especially in the last year, prices -in October data- increased by 6.4% to 11.2 Euros per square meter. Now, families have to face this increase along with other products affected by inflation, which is slowly reducing savings. But have prices already peaked?

Rental price, like all prices, is regulated by the law of supply and demand. If there is less product on the market and many people want to buy it, prices go up. This is exactly the situation where rent lives. “The price is going up because the offer is so scarce and there is no clear policy to put more flats on the market, neither private nor public. Also, people who can’t buy because of the high mortgage prices are going to rent and growing demand,” he explains. Antonio Gallardo, iAhorro analyst. The rental housing supply has dropped notably by 25% in the last year, so he argues that policies that multiply available housing and appease prices are essential. Francisco Inareta, Ideal spokesperson.

In the context of a crisis, landlords no longer see leaving their property for rent as such an attractive option and are shrinking their portfolios. “If you don’t offer the option of security and peace of mind, the investor won’t risk it,” he says. Tony ExhibitionCEO of Compracasa. “The rules on leasing do not follow any European success. There are increasingly intrusive policies that force leasing,” he notes. Sergio NasarreProfessor at the University of Rovira i Virgili.

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The requirements for a rental lease are complex, to the point of being a kind of ‘dump’. Previously it was only necessary to provide one or two monthly payments as a deposit, now usually three months plus the current month are required with added warranties and long service in the company, among other things. “Everything is completely over except for middle-class families with stable jobs,” says the professor. This seriously affects young people and the most disadvantaged groups. Property owners can protect their backs for their part with a rental insurance contract – and they are doing so more and more often. In this way, income is guaranteed in case of non-payment. Annual income costs 5% of the total price of the property.

According to an analysis by Fotocasa, all autonomous communities in Spain experienced an increase in rental prices in the third quarter of the year. “Only 27% of rental homes in capitals are priced below 750 euros,” he adds. Inareta. And although they are predicted to peak this year, prices are not at 1,000 euros either. “The fall in apartment selling prices will cause many owners to consider postponing the sale to make more profit, which can increase the rental supply and reduce pressure on prices,” he notes. casting. It can go down especially where demand is less and prices are more stable, which is a tricky thing in big capitals.”

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