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Rental demand is expanding outside the capital cities

Rental demand is expanding outside the capital cities.

While industry experts expect rental demand to continue to grow due to the increased difficulty in obtaining financing to purchase a home, the rental market has maintained its upward trend in rents. Interest rates remain high and it is becoming increasingly difficult for some members of society to qualify for a mortgage.

When the war in Ukraine had just started a year earlier, the Euribor had closed February above 3.5 per cent. This makes it even more difficult to get a loan to buy a house. And it doesn't look like this Euribor "rally" will end any time soon. The European Central Bank (ECB) will meet in March to confirm a new rate hike that everyone is anticipating in an effort to curb the eurozone's inflationary spiral.

ECB chief Christine Lagarde said last week on Antena 3 that she is delaying interest rate cuts in the eurozone until 2025 and is taking for granted that the meeting in two weeks' time will see a 50 basis point hike in the price of money. She has also ruled out any decrease in the value of money before inflation stabilizes in line with the 2% target, which he believes will not happen for at least two years.

The lack of available rental housing is another factor in this economy. By December 2022, the rental stock indicator, which measures the ratio of available properties to all existing dwellings, had fallen below 1% nationally.

For example, in the two significant housing markets, it is worrying that the province of Barcelona, which is led by its capital city, has lost a significant share of its rental housing stock despite the fact that, on average, the province as a whole only lost 1.2% of its rental housing stock in 2022.

Just over 1% of available properties were for sale in December in the province of Madrid, where the supply of flats has fallen to its lowest levels since the last few months of 2017.

In a second look at the state of the rental housing market, the relative demand for rental properties in the main markets was assessed based on the number of 'leads' (email contacts, counter offers and saved to favorites) received for advertisements published during the last few months of the previous year.

Demand for rental flats in Madrid is not in the top

One of the reasons why Madrid has lost the top spot in demand for housing is because of the prices it has reached over the last year, with an increase of 10.9% in February. It is by far the most expensive municipality among the most sought after, second only to Alcobendas with its monthly rate of 12.6 €/m2.

Leganés had the highest rental demand at the end of 2022, although its prices (10.05 €/m2) are not the lowest in the analysis. This is because the city has a mix of offers that attract people looking for flats close to the capital. Humanes de Madrid (8.44 €/m2) and Pinto (9.7 €/m2) are further behind.

Behind them, the southern belt of Madrid dominates, where Móstoles (10.1 €/m2), Fuenlabrada (9.6 €/m2) and Getafe (11.1 €/m2) stand out. To the north, next to the aforementioned Alcobendas, is Alcalá de Henares (9.9 €/m2).

The most expensive rental market in Spain is in Barcelona

The pressure of demand on the existing supply prevails in the suburbs of Barcelona: Santa Coloma de Gramenet (12.3 €/m2/month) leads the way, ahead of Cornell (13.6 €/m2) and Montcada i Reixac (10.8 €/m2), which are also among the most sought-after places to buy.

Two other large cities, such as Hospitalet de Llobregat (14.8 €/m2) and Badalona (12.6 €/m2), are still ahead of Barcelona, which with its 19.4 €/m2 is the city with the highest rents in Spain.

Other smaller towns such as Barberá del Vallès (101 €/m2), Sant Boi de Llobregat (11.3 €/m2), Sant Feliu de Llobregat (12.1 €/m2) as well as Viladecans (11.3 €/m2) complete the ranking.

Valencia rents rise by almost 20%, driving most of the city's demand to the suburbs

Rents in and around Valencia are concentrated in the smaller towns on the periphery. Valencia (11.5 €/m2) is in a modest eleventh place after a 19.4% increase over the last year, while Foios (5.9 €/m2) has seen its rents fall by 6.4% compared to last year.

None of the neighboring towns exceed 10 €/m2, but notable price increases were seen in Benetusser, where rents rose by 36.7%, Alfafar (15.3%) and Masanasa (11.2%).