Nine months after the approval of the rental law in the Catalan Parliament which regularized the control of rental prices in Barcelona and other 60 towns with more than 20,000 inhabitants, the market continues to consolidate The three main consequences that idealista already analyzed last March. We return to audit the stock data, relative demand and prices in the city of Barcelona, and we compare them with a market without rent regulation like that of Madrid.
Demand in Barcelona has skyrocketed due to rental regulations
On the one hand, the ‘ call effect’ on demand due to the possibility of finding cheaper rentals . The pressure of demand on the supply of rental flats in Barcelona has shot up almost 30% since its entry into force on September 22, where there are more and more interested parties looking for flats of rent at more affordable prices, which puts even more stress on an increasingly scarce supply, as we will see below.
Meanwhile, relative demand in Madrid has fallen in the capital by 0.3% compared to September last year. After the market came to a halt during months of home confinement, it has rebounded from May-June 2020, and is now still below the average of the past two years. The relative demand is calculated from the contacts received by the ads published on idealista.
Another factor that is marking the rental market in Barcelona is that the supply of apartments in the rental market in the capital , declared as a ‘tense housing market’, has decreased by up to -21.2% in the last nine months .
This “downturn” in stock may be due to several factors, such as the fact that more rental contracts may have been signed. However, the statistics published by the Barcelona City Council, based on INCASOL data , speak of almost 12,200 new lease contracts signed in the capital Catalan between October and December, in the average of the quarters prior to the outbreak of the coronavirus pandemic.
Other variables may be that the supply of rental apartments itself is adjusting after reaching highs at the end of 2020. The stock of houses for rent in Barcelona, and practically in all of Spain, shot up after the worst of the pandemic in 2020, doubling its offer in some cases compared to 2019.
Between September and December of last year, the offer of flats at idealista reached more than 23,000 ads in Barcelona in a few weeks . While, since the second quarter of this year, it has not yet exceeded 20,000 ads in any week, confirming the drop mentioned above.
Some experts affirm that the recovery of normality, and the gradual return of tourists to Barcelona can reactivate the offer of tourist rental housing, which had been transferred to traditional rental.
But many other players in the sector fear that the small owners are thinking twice before putting their home in a regulated rental market , given the current situation of legal uncertainty in the rental of Barcelona.
Compared to Madrid, the stock of housing that goes out to the rental market in the capital follows the trend that has been marking since the new normal, and the latest data closed with an increase 2% compared to September 2020. In fact, 30,000 ads were exceeded at the beginning of June, as at the end of 2020 and the beginning of 2021.
Rent regulation has barely affected prices
The third leg of the rental housing market equation is price. In both cities, the rental income prices continue to adjust, as they have been observed since May, after the outbreak of the coronavirus crisis and the new normal. From the highs of the historical series reached in the middle of the pandemic in Barcelona, prices have fallen by more than 14%. But if we look at the average price at the beginning of June with which the rent regulation regulations began, it was barely noticed at -1.4% .
In Madrid, meanwhile, prices remain with the same decline stability that was appreciated in March. If at that time, the decrease was 3.4%, now the decrease is at 3.7%, comparing rental income from the week in which the Catalan measure was launched in September with June.
After 9 months, everything indicates that Law 11/2020 , of September 18, on urgent measures regarding the containment of income in housing lease contracts, which regulates the prices of housing rentals in the city of Barcelona and 60 other towns with more than 20,000 inhabitants, it is not obtaining the desired results.
The rule was born with controversy before its entry into force, with many doubts and controversy in the sector. In addition to not having the legal endorsement of the Council of Statutory Guarantees of the Catalan Parliament itself, it is not obtaining the desired results. The lawyers of the Government assured that the Generalitat did not have nor has powers to regulate rental prices, as it is a State faculty. But the regulations went ahead.
Now, the Government has decided to listen to the lawyers of the Catalan chamber and is going to take it to the Constitutional Court to request an appeal of unconstitutionality for the invasion of powers of the Catalan Government in the matter of housing rather than by the background of the measures. In fact, the Government Spokesperson and Finance Minister, Maria Jesús Montero , has confirmed that “the future Housing Law will incorporate many of the elements” of the Catalan legislation. That is why they have not asked for its precautionary suspension, but have come to affirm that a rental regulation will come with the new state law, at the same time that the TC invalidates the Catalan regulations.
For more information you can visit the College of Property Managers website of Barcelona-Lleida.