The supply of rental housing doubles in Madrid in the midst of the crisis
Before the COVID-19 pandemic, there was an offer in the region of 15,000 apartments for rent and now there are 28,000 homes available. The transfer of tourist homes to the traditional market has influenced this increase. On April 11th, the government approved a ministerial order that regulates rental assistance for tenants affected by the COVID-19 pandemic.
During the confinement as a result of the Corona crisis, everything stopped in Spain. It was a few weeks without business activity and many sectors have suffered the consequences, but in the midst of this crisis, experts in the sector already pointed out that the housing rental market was going to be a winning horse and that seems to be true.
“The trend that is taking place in the rental housing market is an increase in supply. If we look at the data from the Community of Madrid, before the corona crisis there was an offer of 15,000 apartments for rent and now there are 28,000 homes. An offer that in some places in the center of Madrid has even increased by up to 70% as tourist rentals have moved to residential rentals,” said David Caraballo, commercial director of Alquiler Seguro.
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People are now looking more to rent more spacious places and with a balcony
During the State of Alarm period, demand has been contained due to limitations in geographical mobility, especially for students, displaced workers, and foreigners, but when it returned to normal before the summer, there was great interest in renting.
“This already happened in the 2008 crisis, banks demand to have a high percentage of the purchase value saved and families do not have those savings or do not want to spend them given the circumstances, which makes many opt for rent, which does not require initial investment or long-term commitments. Spain now has a rental housing stock of 25% while the European average is 36%, in the crisis of 2008 the parquet increased by seven points and we think that now in the same way will increase the percentage,” said David Caraballo.
Another trend observed in the rental market is that the demand now requires housing with more space and terraces or balconies and this type is gaining prominence to the detriment of smaller and central buildings. Therefore, the demand tends to the periphery to respond, in some cases, to the search for houses with more space and in others, to cheaper housing. On the other hand, the center of the cities has always been taken over by tourist rentals, but now many owners of properties for tourist rentals have opted for residential rentals since they have seen how their reservations for June, July and August have been cancelled and are seeking to ensure their stability and obtain guarantees.
As for the price of the rent, David Caraballo said that “we are in a moment where prices are regulating themselves at the return of the summer. During the pandemic, a lot of supply has been dumped on the market from unsold apartments that the owner has put up for rent at high prices, and now that demand is starting to flow, those prices are being adjusted”,
A study of the 2020 tenant profile of Alquiler Seguro, pointed out that the most common searches of tenants in the main Spanish provinces are still Madrid, with a maximum rent of up to $1,000 (€850), Vizcaya of $947 (€800) and Murcia of $651 (€550), where the most requested homes are two bedrooms. While in Barcelona the rental price is $1,125 (€950), Valencia $710 (€600), Alicante $651 (€550), Malaga $828.7 (€700), Seville $770 (€650), and Alava $828 (€700).
At the end of June, the Government launched the state rental price reference index system with 11.2 million rental data from the last four years. It will be updated annually with information on 1.7 million properties and 33,662 census sections to provide transparency, rigor, and accuracy in the housing rental market.
However, some experts in the sector think that this index is based on income declarations and only goes as far as 2018, so it is already obsolete in order to establish comparable data on the markets in 2020.
The crisis caused by the expansion of the coronavirus has directly influenced the economy of citizens. The job instability in which many tenants find themselves and the difficulties in coping with the payment of rent have triggered the concern of owners to suffer a case of default in their rental housing. There is a lot of uncertainty on the part of landlords and tenants about a possible outbreak of the coronavirus now in the fall, and Alquiler Seguro says they are looking for more protection and legal coverage.
“Security is what is being demanded most by both the landlord and the tenant. In the case of the tenant to access the aid given by the government that requires you to have everything regulated. In Alquiler Seguro we also help the landlord with an aid program based on the cancellation of payments, deferment or reduction of rents,” explains David Caraballo.
The need for aid to the tenant
The Association of Homeowners for Rent – which brings together many of the large holders and also individuals – estimates that at the moment around 350,000 families in Spain are already in a situation of deep economic vulnerability. For them, the payment of rent represents, on average, 48% of their income compared to the 30% agreed as healthy.
On April 11th, the government approved a ministerial order that regulates rental assistance for tenants affected by the COVID-19 pandemic. Tenants in a situation of vulnerability who are entitled to these loans will receive up to $6,400 (€5,400) which means $1,064 (€900 per month) in the form of a micro-credit guaranteed by the Official Credit Institute (ICO) to be paid over six years, which may be extended to ten years.
This measure has been extended and can be requested until September 30th. The deadline for requesting a moratorium, deferment of rent payments, or total or partial cancellation of the rent, of housing leases, in the event that the lessor is a large holder, is also extended to that date for those households in a situation of economic vulnerability. However, Asval considers that many tenants are giving up applying for ICO rental guarantees, since they do not want to increase their debt levels in a situation of reduced income.
(Featured image by Pixabay via Pexels)
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First published in elEconomista.es, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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