The rental market in Spain has experienced substantial growth in recent years, especially in provincial capitals. Despite the economic and social difficulties generated by the pandemic, rental prices have continued to rise due to a lack of supply and growing demand. In 2022, rental prices in Spain increased significantly, with Madrid and other critical regions also affected.
According to Idealista, the Southern European real estate marketplace, which has studied prices over the last four years (between February 2019 and February 2023), the most significant growth has been recorded in Valencia, where prices have increased by 37.9% over these four years. Last year, on a national level, rental prices closed in 2022 at €11.5 per m2, representing an increase of 8.5% compared to the previous year. The highest rents in 2022 were recorded in Barcelona and Madrid, with the price per square meter at €16.8 and €15, respectively. This price increase was fuelled by greater demand for rentals and stricter regulations in the traditional rental market.
Greater demand for rentals:
Greater rental demand, especially from young people who prefer to rent rather than buy a property for lifestyle or affordability reasons, and from foreigners coming to Spain for work, has triggered an increase of supply of flats and houses in urban areas. However, this increased supply has not been sufficient to meet the growing demand, leading to greater competition in the market and a rise in rental prices for individuals in these areas.
Stricter regulations:
Besides, the Spanish government has introduced stricter regulations in recent years. These regulations aim to limit traditional rental prices in certain areas and extend the minimum rental period to five years. These measures have generated criticism from property owners and investors, who argue that they limit profitability and market flexibility. In particular, the 2% cap on rental prices throughout 2023 is likely to cause some owners to resist renting out their available homes, limiting supply and increasing costs. An essential point for a real estate investor is that these regulations only apply to more flexible rental formulas such as Coliving, which contributes to the boom in investment in these new spaces and the increase in housing supply to accommodate the strong demand.
Substantial price increases in 2023:
Solvia, the real estate services company, has just published a report, the IV Solvia Market View 2022, which among other conclusions, predicts a substantial increase in rental prices in Spain in 2023. They point out that the lack of supply will result in a rental increase of between 15% and 20%, with tense markets in the coming months.
Conclusion:
Despite the economic and social difficulties generated by the pandemic, renting has become an increasingly attractive option for property owners and tenants. The rental market in Spain has experienced sustained growth in recent years due to increased demand for rentals by the population and stricter regulations. The imbalance between supply and demand could result in substantial price increases in the short term.
