Rents rising in Spain amid calls for rental controls

esidential rental prices are rising in most Spanish cities with the growth led by Barcelona, Madrid and Palma de Mallorca but some areas are seeing rents fall.

Average rents in Barcelona have now increased from €892 a month in 2012 to €1,478, a rise of 65.7% while in Palma de Mallorca they are up 40% from €700 a month to €986 over the same time period.

While in the capital city of Madrid rental prices have not risen as much but are still up 20% from €1,048 per month in 2012 to €1,256 a month now.

Areas that have seen rents fall are led by Santander, the capital of the northern region of Cantabria, where prices have dropped by 3% in the last five years to an average of €649 a month.

According to Mark Stucklin of Spanish Property Insight the growth of rents in many Spanish cities is partly due to a shortage of homes to rent but in the cases of Palma and Barcelona, tourist rental demand is one of the big factors driving up prices for locals.

He is predicting that there is likely to be more political opposition and hostile legislation towards holiday rentals especially as rents are set to increase. Indeed, a recent report from the international real estate company Cushman & Wakefield forecasts that average residential rental prices will rise 10% this year in Madrid and 5% in Barcelona.

Figures from Spanish property portal Idealista show that rental yields are also rising, implying that rents are rising faster than house prices. The figures show that average yields rose to 6.3% last year, up from 5.5% the year before.

Stucklin is a bit sceptical about the yield figures and believes they are not that high but the data is still significant. ‘Even if they aren’t as good, they still offer much better returns to small and big investors alike than fixed income and other common asset classes,’ he pointed out.

He also pointed out that the city administrations of both Barcelona and Madrid recently called on the Government in Madrid to change the rental law to control rents so that more local people can rent a home. Politians have also voiced concerns that in certain areas the majority of homes are holiday lets and local people are being priced out.