The average rental price asked by landlords fell by 5.9% in November, according to the property portal Idealista, which has the biggest rental listing database in Spain.
The average rent asked in November was 10.5€/m2 per month, according to Idealista’s data, meaning an average flat of 100m2 would cost 1,050€/month to rent.
Rental asking prices fell in big cities like Madrid (-4.9%) and Barcelona (-1.7%) but rose in Valencia city (+2.2%), Palma de Mallorca (1.3%) and Malaga city (+0.2%).
As a result of the latest change in renal asking price, San Sebastian in the Basque Country is still the most expensive city in Spain to rent a home with an average asking price of 15.8€/m2 per month, followed by Barcelona (15€/m2/month) and Madrid (14.6€/m2/month).
By autonomous region, rental asking prices fell the most in the Madrid region (-5.7%) followed by Catalonia (-4%) and the Valencian Community (-0.6%).
Why are rental asking prices falling around Spain? Rental prices are a function of supply and demand, and there are various factors at play.
One factor is likely to be lower demand for tourist accommodation because of the pandemic, which increases the supply of accommodation available for other types of housing demand.
Another factor could be reduced purchasing power also brought about by the pandemic and fast rising inflation. Spanish employment is holding up well in the face of the covid with the biggest fall in unemployment in November since 2008, and nine consecutive months of falling unemployment – the longest on record – but many households have seen their purchasing power reduced by lower economic growth and inflation currently at 5.6%. In real terms (inflation adjusted) rental asking prices have fallen more than 10% in the last year.
It is interesting to note that rental asking prices have fallen more in Madrid, where there are no rent controls, than in Barcelona, where rent controls are in place to stop rents rising.
Studies have shown that rent controls reduce the supply of affordable housing over time. According to the Brookings Institution, a left-leaning think-tank based in Washington DC, rent control “appears to help current tenants in the short run, [but] in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood.”
If this data is anything to go by, rent controls not only fail to improve housing affordability over the long term, they also stop rents falling in the short run.