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Supply of homes for sale and rent declining in most areas

There are fewer homes for sale and long-term rent on the market, partly due to government policy.

There were 4pc fewer homes listed for sale in the third quarter compared to the same time last year, reveals a new study by the property portal Idealista. Prices tend to rise when the offer side of the market shrinks without a corresponding decline on the demand side.

The majority of provincial capitals have fewer homes listed for sale at Idealista than a year ago, with declines of 20pc in Valencia, 15pc in Alicante, 11pc in Palma, 10pc in Barcelona, 3pc in Malaga and 1pc in Madrid. On the other hand, the offer for sale increased by 2pc in Bilbao, and 5pc in Seville. By province, the supply of homes listed for sale fell by 17pc in Tenerife, 13pc in Valencia, and 4pc in Malaga, but rose by 2pc in Alicante and 3pc in Barcelona. The national average was a 4pc decline (charts below).

Rental supply declines

Data from Idealista based on rental listings in Q3 also shows a general decline in long-term rental listings and switch to seasonal listings that are penalised less by the new Housing Law.

The supply of long-term rental homes on the market declined by 12pc countrywide in Q3 (YoY), and by as much as 42pc in Las Palmas in the Canaries, as illustrated by the next chart. 

stock of spanish homes for rent Q3 2023 yoy change

Along with reducing the supply of rental homes on the market, the new Housing Law, which introduces rent controls and new costs and risks for landlords, has caused a massive shift away from long-term to seasonal rents (temporada in Spanish), which are better for landlords but reduce the supply of long-term rental accommodation that Spain needs to solve its ‘housing crisis’. Idealista estimates that the supply of seasonal rents has been growing everywhere, and has now reached 28% on the rental supply side in Barcelona, as illustrated in the next chart.

I suspect the Idealista study massively underestimates the switch from long-term to seasonal rents that has occurred in ‘hot’ markets like Barcelona and Madrid as a consequence of the new Housing Law. If you search for a home to rent in Barcelona or Madrid today, you will find around 80pc are offered partly or fully furnished, which usually means seasonal rentals.

A housing law intended to increase housing acces by forcing landlords to shoulder higher costs and risks, and lower rents, has led to shortages and higher prices. What a surprise.