Barcelona Rental Market Is Out of Control

Rents up 50% since 2013, wages go nowhere, a third of residents earn less than €1,000/month.

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

For the first time in over a decade, I spent a few days last week flat hunting. It was not for my own benefit but rather to provide moral support to a close friend of mine who’s looking to rent a place in the same central Barcelona neighborhood where my wife and I live, Fort Pienc. The experience was a depressing one for the both of us. Not only is my friend almost certainly priced out of this highly gentrified neck of the woods, but my wife and I could also find ourselves in the same predicament the next time our contract is up, in three-and-a-half years’ time.

When we moved to this once staunchly middle class neighborhood way back in 2006, just before the collapse of Spain’s crazy housing bubble unleashed a surge in demand for rental properties, you could rent a decent three-bedroom apartment (with one of the bedrooms so tiny it’s barely large enough for a bed) for between €800 and €900 a month. Today’s prices are almost double that and Barcelona’s rental market is now so skewed in the seller’s favor that flat hunting has become a deeply demoralizing, if not humiliating, experience for all but the richest renters.

Despite a moderate slowdown in prices resulting from the recent political uncertainty in Catalonia, rents in Barcelona have still risen by around 50% since 2013, with the result that more and more local people are getting priced out of the market. But it’s not just the price of rents that are prohibitive; so, too, are the upfront fees and deposits tenants have to pay.

For a three-bedroom flat that costs, say, €1,600 a month (nearly $2,000) — a standard price in my neighborhood — a tenant needs to put down a two or three-month deposit (€3,200 or €4,800) plus a finder’s fee worth roughly one-and-a-half month’s rent (around €2,400). In Spain, it’s the tenants (and not the owners) who bear the lion’s share of the agency fees. Once you throw in tax (another €400) and your first month’s rent, you’re as good as €8,000 to €9,000 poorer, just to get moving.

There are four main reasons why rents are so high in Barcelona:

  1. Supply and demand. Ten years ago Spain boasted an average home ownership rate of 78.5% — one of the highest in Europe. But the Crisis put an end to that as hundreds of thousands of people lost their homes. Since then, many thirty-something couples who would have traditionally bought an apartment with a mortgage have instead chosen (or had little choice but) to continue renting, putting extreme pressure on Spain’s already limited rental housing stock.
  2. The Draghi effect. Low interest rates have made it more and more difficult to generate returns from traditional investments such as government bonds or long-term savings accounts. As a result many investors, including big global funds like Blackstone, Lone Star, Apollo, KKR and Goldman’s Madrid-based subsidiary Azora, have piled into the buy-to-let market where profits can be far juicier, especially if you can pick up big batches of subsidized housing on the cheap.
  3. Barcelona’s tourist boom. With far larger profits to be made in the short-term tourist rental market, many property owners and developers have shifted their focus away from long-term rentals. It’s simple math.
  4. Barcelona’s popularity for the well-heeled, footloose global professional. Well paid professionals are flocking from countries with much higher salaries and higher rental rates than Spain. For many of these people, the real estate in Barcelona is a bargain.

In a study of rental prices in 30 of the world’s most “magnetic cities” carried out by U.S. real estate website Rent Café, Barcelona placed as the 11th cheapest location, with an average price per square meter of €17.13. That compares with €47.72 per square meter in Manhattan, $43.84 in London, $51.45 in Zurich, $51.13 in San Francisco and $50.27 in Hong Kong. In other words, Barcelona is dirt cheap — for people who aren’t on local salaries.

In real terms, average salaries in Barcelona have fallen by 6.5% in the last five years, even as the local economy has flourished and the cost of renting and other basic essentials such as electricity have soared. On average it is estimated that Catalan tenants would have to spend an eye-watering 46% of their gross monthly earnings to afford the rent on an average 80 square meter (861 square foot) apartment. And that’s all of Catalonia, not Barcelona.

Unsurprisingly, more and more people are sharing. But even that can be prohibitively expensive with some people in some central areas paying as much as €700-800 a month for a double room in a ten-bedroom apartment. That’s as much as many young local residents earn on a monthly basis. According to municipal data cited by the Catalan daily El Periodico, 64% of people under the age of 30, and a third of Barcelona residents taken as a whole, earn less than €1,000 a month.

Ironically, the right of all Spanish citizens to decent and adequate housing is enshrined in Article 47 of Spain’s 1978 constitution — the same constitution that the Spanish government cites each time it refuses to even discuss the possibility of greater autonomy for Catalonia. Yet in Barcelona as well as other Spanish cities like Madrid and San Sebastian, more and more local residents, of all ages but in particular the youngest, are finding that such a right no longer exists in the city they were born in. By Don Quijones.

Turns out all that’s needed to halt a property bubble is a constitutional crisis of epic proportions. Read… Chaos in Catalonia Hits Barcelona Housing Bubble

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  24 comments for “Barcelona Rental Market Is Out of Control

  1. David
    Jan 23, 2018 at 2:04 pm

    In Barcelona a three-bedroom apartment costs €1,600 a month is about $CAD 2,400.

    I’m in Vancouver and for a nice downtown area you’re looking at about double that for a three bedroomer.

    • Joan of Arc
      Jan 23, 2018 at 2:21 pm

      When I move to Spain I don’t plan on renting in Barcelona where the rent has gone up 50% since 2013. Neither do a plan to rent where the rain falls mainly in the plain…in Spain. Where? In Spain!

  2. michael Engel
    Jan 23, 2018 at 2:07 pm

    Don’t worry DQ, July 2021 is slightly after Nov 2020 and Jan 2021.
    In the next 3.5 years, you are going to have plenty to say and the RE market
    will be your friend.
    Your next lease will be renewed at a much lower price and your landlord is lucky to have you for additional three and a half years.
    Think about rent rollback, not higher price.
    When Messi is out, the real mess will start.

    • Jaco
      Jan 24, 2018 at 3:07 am

      I wholeheartedly agree Michael. And I do not believe for a second we are going to have a soft landing like W. Richter mentioned during his appearance on the X22 report the other day.

      • Jan 24, 2018 at 9:09 am

        Concerning that soft landing, I think I said “hope,” and added that this might be “wishful thinking,” because there is so much more risk out there than before the Financial Crisis that it would get really messy if it happens all at once — and I really don’t want to see that — and central banks would come out with even bigger schemes to screw things up even more.

        • Jan 24, 2018 at 11:19 am

          Wolf, Im still shocked that you cant see that the entire World’s management teams (.govs) are preparing for the pulling out of the rug from beneath the dollar….The plan to destroy the USD was created at the same time the new debased dollar was implemented at Bretton Woods…. (See Economist Magazine Cover from Jan 9, 1988)
          Swiss Central Bank all in on US equities Years ago.
          Every American and European major financial inst. all in on Equities years ago..
          Why do you think that is Wolf????

          They knew the stock buybacks and free money would pump the market to the biggest bubble in history..How could they not know, its their job to know…What they tell you is another story.

          They knew this years ago, yet you still man this website like its all an accident and no one could have known….Yup TEAM 33 is just trying to run a legitimate operation, nothing to see here…..Sheeeesh Wolf get a clue….

  3. troodon
    Jan 23, 2018 at 2:19 pm

    Will be the same problem in Berlin like in Barcelona in a few years.

    • Jason Whittle
      Jan 24, 2018 at 12:50 am

      Having participated in the bidding of Barcelona properties being packaged as toxic assets by the banking sector in December 2012, I almost acquired the development at the Sugar Factory in Poble Nou for EUR2.5m, just the price of the foundations, land effectively for free. Judging by the rent movement since then I should have bid higher! Berlin is a different market. Lots of US investors went in 2013 expecting middle class housing there to mimick the rest of Europe but the German’s, wisely, are not too fussed about owning a home. Mortgage percentages remain stubbornly low.

  4. Don Quijones
    Jan 23, 2018 at 2:21 pm

    Thanks for that, Michael. Made me feel a little better, though the mere notion of a Barca team without Messi is, by this stage in proceedings, almost impossible to imagine, and for many of my friends, even harder to bear. :-]

    • Maximus Minimus
      Jan 23, 2018 at 3:37 pm

      Just think of it as once in the human history experience – and you will have been part of it (admit, I don’t have reliable data about the Roman empire).

      About Messi, you don’t owe him anything. The sooner these spoiled, overpaid brats get what they truly deserve, the better for all.

  5. Steven B Smith
    Jan 23, 2018 at 2:37 pm

    Invasion has consequences, primarily a rent increase.

    Rent is the planet’s biggest business, bigger than oil, bigger than weapons, rent.

    Kushner is exhibit A.

  6. Rates
    Jan 23, 2018 at 2:53 pm

    Been saying all along. The “crisis” has been overblown. It’s obvious that people have more money than they say they have. Rent increase, sure people complain but they keep paying.

    Keep waiting for a Europe crisis guys, Europe is here to stay.

    • Matt P
      Jan 23, 2018 at 3:01 pm

      Agree. People throw around the word crisis too freely. It’s not a crisis until a significant portion of the population is living on the streets. Right now is just a housing squeeze. Eventually they will squeeze too hard causing a break that will lead to a crisis.

  7. Jan 23, 2018 at 3:11 pm

    Same in every major city, here in Dublin my rent has gone from Euro 1600 2012 to Euro 2500 (2017) for a 2 bedroom/ 2 bathroom.

  8. Justme
    Jan 23, 2018 at 3:32 pm

    Off Topic: More cryptocurrency speculative madness:

    11:50 AM EST, 01/23/2018 (MT Newswires) — Amazon.com (AMZN) edged up more than 1.7% amid speculation the company may be gearing up to create one of the world’s largest cryptocurrency exchanges.

    Will cryptocrash be the event that brings everything down with it?

  9. Gershon
    Jan 23, 2018 at 4:05 pm

    Don, you could’ve summed up your four main reasons for soaring rents with just four words: central bank monetary malpractice.

  10. Gershon
    Jan 23, 2018 at 4:21 pm

    Between the Fed enabling its Wall Street cohorts to engage in runaway speculation in the housing market and the proles being increasingly unable to afford to put a roof over their head in our oligarch-looted neoliberal economies, people better get used to living in nano-apartments that still eat up most of their disposable income.

    http://www.scmp.com/property/hong-kong-china/article/2130129/chinachem-says-its-portfolio-has-no-micro-flats-despite

  11. kitten lopez
    Jan 23, 2018 at 8:55 pm

    wow, Don, i’m not feeling as silly or jokey as the others above, as i’m here in san francisco, and my stomach RETCHED as i read your article. i wanted to look away and not read it, but you’re a good writer because you got me. and it is not only a crisis, but a true TRAUMA and TRAGIC to watch as your home and world gets vivisected in front of your very eyes and so fast… and for …WHAT???

    and you can’t get it back when the party’s over. decades of life and character and communities …poof.

    i’m very very sorry. i have nothing clever or funny or comforting to say. just i’m very sorry. it is terrifying to have others have more and more control over your just existing in peace. or trying to.

  12. mean chicken
    Jan 23, 2018 at 9:17 pm

    Sounds like a squeeze. But people have to live somewhere. I’d bet builders are busy beavers…

  13. interesting
    Jan 24, 2018 at 12:00 am

    How can this rental insanity be world wide now? WTF is going on, as mentioned in this article, rents keep going up up up while wages are flat or going down. AND there’s a homes for sale “shortage” it seems everywhere as well.

    There was an anecdotal story I read where this author claimed that the vacancy rates are actually far higher than it seems in that rents are so damn high most apartment complexes can have a much high vacancy rate due to those units that are rented are at such I high rate it covers over those vacancies.

    All I know it it makes no sense to me. The rent to income ratio is so out of wack that there’s gotta be something nefarious going on.

    • xman
      Jan 24, 2018 at 6:23 am

      there is…. its called Chinese money, looking to park… not inhabit. That’s right 1.3 billion people whose wealth is growing. And they’re preparing to hoover up everything you’ve got, because they can’t trust their own government… and the politicos in the west are giving them access, probably to finance their next election campaign.

    • nicko2
      Jan 24, 2018 at 9:08 am

      Concentration of wealth with the 1%. Same story everywhere. After all, there’s only so many houses one can live in at a single time. Dickensian.

    • MD
      Jan 24, 2018 at 1:08 pm

      Usurious lending is what’s going on…both to buy and to rent.

      Financial alchemy, based on ever-increasing levels of personal debt.

      When the GDU starts (That’s my new acronym – the Great Debt Unwind) the pain IMO will be intense and long-lasting. Probably decades long and with central banks have to do ever-more propping up of an utterly broken system predicated on unattainable perpetual, debt-fuelled ‘growth’ which mostly finds its way to the already-wealthy who spend it on errrrrr, real estate.

      Maybe then we’ll transition to something that’s more useful for the majority – but that’ll only happen by force and fear.

      • faustino
        Jan 24, 2018 at 3:42 pm

        …sure 50% isn;t cash buyers from abroad?

Comments are closed.