If you’re renting in Spain, you’ve probably felt the pinch in the last couple of years. Rental prices in Spain are now on average 9.4 percent more expensive than last year, according to data from Idealista. In bigger cities such as Madrid, Barcelona, Valencia and Málaga, that figure is creeping closer to the high-teens and twenties.
Many renters hope that the government’s housing law will soften the impact in 2024, but the reality is that the market is a little more complicated than that.
So, what will happen to rents in Spain in 2024?
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Spanish rental market 2024
Looking ahead to next year, it seems that experts point to two key features of the rental market for 2024: firstly, that the supply shortage will continue and, secondly, this will continue to drive prices up.
However, 2024 will also be the first year that rent price controls as outlined in the housing law will be implemented on the basis of a price index, and that does raise some questions.
Rent caps
Previously, during the first five years of rental contracts in Spain the landlord had the right to increase the price each year by the same percentage as the CPI. But the housing law law capped them for 2023 and 2024, and established an index that will replace the CPI reference.
In 2023 the limit was 2 percent, but in 2024 a 3 percent cap will apply, whatever the level of inflation. That is to say, landlords may not raise the price of their contracts already in force above 3 percent, but unfortunately, this rental cap does not apply to new contracts signed, nor those signed after 2019.
Despite that, Atlas Real Estate Analytics forecast that rent prices will remain on the rise in the coming months, and that rent caps could actually contribute to increases. The company told El Economista that "the fear of rent regulation is causing a certain rebound effect on prices, as landlords try to pass on at the beginning of the contract all the price increases that they are not going to be able to make throughout the duration of the subsequent contract.
"This means that when a new asset is listed on the market, the jump from the previous price is very high, contributing to the overall increase in prices."
'Stressed areas'
Another new feature for renters in 2024 is that the government’s price index allows local councils to use it as a reference point to declare “stressed areas” and limit prices in them. However, some experts say this could also have an effect on the market that will negatively impact renters.
While stressed markets and price caps will limit price rises for some renters renewing their contracts, experts say that in the long term it could actually hurt renters because some owners will take their homes off the market, further compounding the shortage of rental accommodation on the market and driving prices up.
READ ALSO: What will happen to property prices in Spain in 2024?
"Never before has the rental market had such reduced available supply as now. The available rental stock is at an all-time low", says María Matos, director of research at Fotocasa.
According to data from Idealista, the availability of permanent rental housing has decreased by 12 percent in the last year and continues to fall sharply in the main markets, dropping by 26 percent in Madrid, 23 percent in Málaga and 12 percent in Barcelona.
"The main consequence of the lack of available supply is the overpricing of rental housing, which was reflected in an intense escalation during the first half of 2023... surpassing even the mark recorded during the 2007 bubble," Matos adds. As a result, Fotocasa estimates that the price of rents will rise above 5 percent in 2024 on average.
Holiday rentals
Another trend that could affect renters in Spain is the explosion in the number of tourist and holiday rental properties in Spain, an issue that governments in many parts of Spain have started to try and better regulate.
READ ALSO: Which cities in Spain have new restrictions on tourist rentals?
The market shortage is "not because owners have sold their apartments," Gonzalo Bernardos, Director of the Master's Degree in Real Estate at the University of Barcelona, says. "There is a huge transfer from usual rental to seasonal lease."
Why would they do this? Put simply, because holiday rentals are not considered permanent housing rentals, so would therefore be exempt from price caps.
Atlas Real Estate Analytics also points to the "higher percentage of properties dedicated to short and medium stays and not to rentals in the main urban markets," as a factor price spikes.
Sadly, 2024 will likely see a continuation of this trend. By the end of 2023, holiday rentals accounted for 10 percent of the entire rental offer in Spain and experienced growth of 40 percent in the last year, reaching 28 percent of the total rent share in Barcelona.
Mortgage rises
2024 will also likely see the interplay of mortgage rates and rental markets negatively affect renters. As interest rates have risen, more and more Spaniards can no longer afford to buy property and are therefore pushed into the already saturated rental market, meaning prices rise.
"Renting will be from now on, in 2024, the housing solution chosen by the majority of families who have not been able to buy a home," Matos suggests.
Room rentals
Faced with all this pressure, industry professionals point to a possible trend for 2024: a boom in private room rentals as opposed to entire flats and apartments.
"The star product will be room rentals. People will not be able to rent apartments and will start looking for rooms," Bernardos predicted a year ago, and 2024 seems set to be no different.
According to data from Fotocasa, the demand for rooms in shared homes has grown by 14 percent. Clearly, as demand for single rooms rises, so will the prices, and this also has an impact on the ways in which rent prices will rise, and the areas that will be affected most.
Experts predict that prices for individual rooms will go up where shared flats are concentrated, generally in city centres and in university areas, whereas the rental costs of entire properties will likely rise in areas that are traditionally cheaper.
"If we look at complete homes, prices will grow more in traditionally cheaper areas. But if we look at rooms, they will rise more in city centres and near the universities," Bernardos predicts.
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