The Backlash to Spain’s New Property Boom Has Begun

When locals can’t afford to live there anymore.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Spain is in the grip of a property boom. Whereas the last bubble was driven largely by the rampant construction and sale of new homes, with the country at one point accounting for more housing starts than Germany, France, Britain and Italy combined, the focal point of the new boom is the smaller but fast-growing rental apartment market.

Spain has traditionally been a country of home-owners, with an average ownership rate of 78.5%, 10 percentage points above the EU average. But things are changing.

“The concept of owning a home in Spain was almost religious, but that’s changed for an entire generation of young people who have seen people losing their homes, (their house) prices dropping, and losing access to credit,” said Fernando Encinar, co-founder and head of research at the online real estate marketplace Idealista. “That has made renting a more attractive option, especially in big cities such as Madrid and Barcelona.”

A recent study by Idealista showed that rents are on the rise across many parts of Spain, though the country is still home to over half a million vacant properties. The cost of renting in Madrid and Barcelona, which between them account for 16% of those vacant properties, has reached historic highs. In Madrid, rents have risen on average by 27% since 2013, and in Barcelona they’ve surged over 50%, with the result that more and more local people are getting priced out of the market.

In 2013, when the economy began its incipient recovery from the last burst property bubble, just 8% of rental properties in Barcelona were priced above €1,500 a month, a sum that is prohibitively expensive for most locals; now over a third are.

One of the main reasons for the soaring prices is Barcelona’s unending tourist boom. With far larger profits to be made in the short-term tourist rental market, property owners and developers are shifting their focus away from long-term rentals. Short-term property speculators, domestic and foreign, are piling in, too. It’s simple math. According to a British real estate platform, Nested, renting a property on Airbnb can be as much as 256% more profitable than a traditional lease.




Recent government regulation has hardly helped matters. In 2013 Spain’s central government reduced the minimum duration of rental contracts from five years to three. This happened just as global banks and private equity funds were piling in to the market to pick up the juiciest real estate assets being auctioned off by Spain’s publicly subsidized bad bank, Sareb. They included huge batches of social housing, despite the fact that Spain has one of the smallest public rental housing stocks in Europe. In next to no time, contracts were terminated and rents were hiked.

Empty apartments, buildings or even entire towns are a lingering legacy of Spain’s financial crisis. At one point not that long ago, the country was home to an estimated 3.4 million empty properties. Even now, real estate vacancy remains a problem. From my apartment window, in central Barcelona, I can see two blocks of flats that have been empty for years. Another block, also empty but occupied by squatters (a common phenomenon in this city), was recently pulled down by the City Council.

Another reason why rents are soaring in Barcelona is the city’s rise in popularity as a home base for the well-heeled, footloose global professional. As El País recently reported, hordes of global professionals are being seduced by the cost and quality of life on offer in the Catalan capital.

“The quality of life offered by Barcelona is unbeatable,” says Steve Cahill, a British expat with several international projects on the go. “It is a safe city, there is talent, very good infrastructure and communications, a really diverse cultural scene, the food is fantastic, you’ve got the sea and the mountains nearby, and the sun is always shining. It’s the perfect combination.” And the rent, while expensive to Spaniards, still feels affordable to foreigners.

Propelled largely by global forces, the onward march of gentrification continues. With it comes a potpourri of pros (the renovation of run-down neighborhoods, opportunities for local entrepreneurs and broader cultural diversity) and cons (loss of local character, soaring rents and prices, and the ousting of local people from their homes and neighborhoods).

It is now virtually impossible to find an apartment for under €800 a month, even though a third of Barcelona’s local population earns less than that amount.

But the local resistance is rising. Last week the city saw the launch of its first ever tenants union, modeled on the associations already in existence in other European countries. The city council – which is run by the leftist mayor Ada Colau, herself a former housing activist – has applauded the initiative, describing it as “in sync” with her own policies, which include occasionally fining banks hundreds of thousands of euros for keeping properties they own empty.

The union’s stated goal is to serve as a “voice to defend housing as a right in the face of those who consider it merchandise.” The group says it will defend rent control and longer leases, and offer its members technical and legal advice. It is not ruling out a city-wide rental strike as happened in Barcelona in the tumultuous 1930s.

In a potent sign of things to come, Madrid, where rents are forecast to rise even faster than Barcelona this year, launched its own tenants union on Friday. With new chapters expected to spring up elsewhere, Spain’s younger citizens are sending a clear signal: if the authorities continue to court property speculators to the exclusion of local citizens, a backlash is on its way. By Don Quijones.

A new set of taxpayer-funded housing subsidies are planned to benefit banks, real estate agencies, construction companies, PE firms, and landlords. Read…  Spain’s Government Presses Property-Bubble Rewind Button




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  11 comments for “The Backlash to Spain’s New Property Boom Has Begun

  1. Martín Stewart
    May 16, 2017 at 12:59 pm

    The fact is that the majority of house owners who guananteed the purchase of family members now are themselves on the housing list so renting is the only option ,
    The banks have destroyed the growth and financial capability of the last generation along with a stupid ill prepared government who are only interested in protecting the share values of the banks thus keeping the credit rating lower for institutions to borrow let’s face it Spain is bankrupt and will be for a long time to come .
    The rent rises are due to several factors one being that the shortage of rental property and 2 as there are not mortgages available for the people who lost there property due to the anterior solution .

  2. John Doyle
    May 16, 2017 at 4:15 pm

    This is almost like reading about Australia, and Sydney instead of Barcelona. Barcelona is not as nice in winter but otherwise both have great climates. Business types are moving to Sydney as per B. and while we don’t have such a tourist boom we have population pressure too.
    Also we cannot afford the quarter acre house blocks of yore so there is an apartment building frenzy right across the city. East coast Aus has over 550 tower cranes operational, which is more than the East coast of the USA with 20? x the population.
    Here we talk weekly rents. It’s widespread for a two bed flat to cost $A550/week. so more than in Barcelona. A lot of similarities.

    • Frederick
      May 17, 2017 at 7:54 am

      I preferred Madrid to be honest Barcelona was too touristy for my taste and we got robbed by a Roma kid They are all over Barcelona Wouldn’t really want to live there fulltime regardless of all the so-called attributes

  3. Kreditanstalt
    May 17, 2017 at 2:43 pm

    Want to stop the “onward march to globalization” in its tracks?

    Abolish central bank interest rate targeting. Or, better yet, abolish the central banks themselves.

    When the counterfeiting ends and the actual ability (or inability) of business to turn a profit selling affordable goods to live-within-their-means consumers has to begin, it will mean the end of speculative activity based on nothing.

    • John Doyle
      May 17, 2017 at 8:48 pm

      It’s not the Central Banks. It’s the idiots in charge we call politicians. They think asset inflation is unadulterated good news. I think readers here know better. Their paymasters like globalisation, therefore the politicians like globalisation. The spin off of excessive asset inflation is unaffordable housing. Eventually it will strangle the vitality of the affected city, or cities, as the creative cohort will leave for better housing prospects in other cities. This phenomenon is already happening.

      • Thomas
        May 26, 2017 at 1:34 pm

        The politicians are wholly owned subsidiaries of the banks. They accept the bribes, er I mean “contributions” and do the bidding of their masters. It has been so since the invention of banking.

        When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.
        – Napoleon Bonaparte

        • John Doyle
          May 27, 2017 at 1:03 am

          Yes indeed. BUT a monetary sovereign government has no need of bank[st]ers, so in theory we could do what you say, that is, manage the economy without big private banks. Unfortunately they have wedged governments for centuries and made themselves seem essential. But they are not. The power over the currency is invested in the government, via the Constitution, and the government can do whatever it chooses about it.

          So, it can choose the present system, which it has, but it can instead choose to be the sole issuer of the currency and buy all the projects it wants without having to borrow a penny, and vastly cheaper without the profit motive. Fat chance of that however, with banks standing in the way.

        • May 27, 2017 at 8:34 am

          John, you keep forgetting to mention in your rosy money-printing scenario that creates wealth out of nothing: These governments have the power and willingness to destroy the currency. So if they buy short-term votes or approval by paying for all kinds of things with newly issued money/currency, it’s truly very cheap, until suddenly it gets very expensive as the value of the currency that everything is denominated in, including wages, saving, and retirement benefits, collapses.

  4. Ambrose Bierce
    May 19, 2017 at 9:17 am

    On the local scale this is gentrification, the same process goes on in Santa Monica. The Chinese have reverse gentrification, Potemkin cities for the rich. Now activists get involved, public housing, crime ridden projects. (The Bronx) In Africa they build game preserves to save the animals (for shutterbug tourists) where the local people aren’t allowed to hunt or live. It’s their 1% world, we just live in it.

  5. R Davis
    May 27, 2017 at 11:22 am

    Is it possible that they young people of Spain are like they young people of Australia in that they have a mind to live free & easy – rather than to be shackled by the misery of domestic enslavement like their parents ?
    Renting is not having a bankers noose around their neck.

  6. R Davis
    May 27, 2017 at 11:34 am

    We also have lot’s of empty apartments here – what happens – opportunists looking for an opportunity – break in & strip down the apartments. The white good – kitchens – doors – taps – anything that can be disconnected & carted away.
    So – now the apartments are left as empty concrete shells for the duration – some apartments have deteriorated – some fallen out of style – derelict new apartment blocks waiting for demolished.

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