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Rents in Spain Soar Over 20% in Four Major Cities

The Spanish government has recently extended rental contracts for six months and limited the annual review of contract rents to 2%. This is in response to inflation and an increasingly scarce rental market, which is being driven by high demand and a dwindling supply. The measures have been met with mixed reactions, with some seeing them as a danger.

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The price of rents is growing at double digits in a dozen cities compared to the levels of a year ago. And the big cities have accumulated rises of up to 22.7%. This is the case of Barcelona, where the accumulated increase is more than double that of Madrid (11.2%). Alicante is the second of the capitals with the highest year-on-year increase, with a rise of 23.4%, followed by Valencia (20.9%) and Malaga (20.7%).

In total, 48 capitals have rental prices above those of a year ago. Overall, the rental price of housing in Spain has increased by 8.4% over the last 12 months, according to the latest report published by the portal Idealista. Only Palencia (-4%), Cordoba (-0.3%), and Zamora (-0.1%) recorded decreases.

The rises in the rental market occur in the context of inflation when the Government is trying to limit the increases that landlords apply to tenants when it is time to review the contract. The Council of Ministers on Tuesday established a six-month extension for rental contracts that end before June 30th, 2023, and extended until December 31st, 2023, the 2% limitation on the annual review of rents for current contracts.

But from the landlords’ side, these measures are seen as a danger. “The main problem that rental has had in 2022 is the axis on which its evolution will be vertebrated in 2023: the lack of available supply. The growing strength of demand is joined by a dwindling supply that does not find replacement,” said Francisco Iñareta, spokesman for Idealista.

Read more about the price of rents in Spain and find the most important business news of the day with our companion app Born2Invest.

The 18% increase in rents in Barcelona doubles that of Madrid in the last year

From the real estate portal, they assured that the Government’s measures do not encourage the appearance of new products in the market but “are causing the drastic reduction of the rental real estate stock.” “The equation is simple: less housing and more demanders result in price tension,” summarized Iñareta.

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Although they believe that the trend could extend through 2023, they also believe that the price level reached in some markets and the decline in the purchasing power of tenants “could cool the bleeding of supply and the escalation in prices.” In Spain, there are some 3.5 million rented homes, according to data from the Ministry of Transport, Mobility and Urban Agenda.

From Fotocasa, another of the main real estate portals, they assured that fourteen of the seventeen autonomous communities and 43 of the 50 provincial capitals have the highest prices since the index they elaborate has records. “We detect a deficit of 2.5 million homes to cover the rental demand in our country and the gap is growing every day,” they pointed out.

According to their calculations, rental demand has risen three points this year while supply has dropped two, which pushes prices up and makes access to rental housing even more difficult. In addition, a study carried out by this company reflects that one out of every two tenants affirms that their economic situation prevents them from acquiring a home.

Lawsuit against the State

The impact of the change in monetary policy will also have consequences. For the time being, it is slowing down the euphoria for the purchase of housing and this is causing demand to crowd the rental market, leading it to a “critical” situation.

In this context, the Association of Homeowners for Rent (Asval) reminded that 75% of the owners are individuals with one or two homes and that they use them to rent for regular use to supplement their income or pension, without being oblivious to the effects of inflation.

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In addition, this association is encouraging its members to file a property claim against the State for the effects of the 2% cap. The Rental Negotiating Agency (ANAQ) estimates that in the nine months the measure has been in effect, landlords have lost some €1.8 billion.

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(Featured image by mastersenaipar via Pixabay)

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First published in EL NDEPENDIENTE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.

Andrew Ross is a features writer whose stories are centered on emerging economies and fast-growing companies. His articles often look at trade policies and practices, geopolitics, mining and commodities, as well as the exciting world of technology. He also covers industries that have piqued the interest of the stock market, such as cryptocurrency and cannabis. He is a certified gadget enthusiast.

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