Invisible rentals, a phenomenon that is appearing on the rental market. According to property portals, rental offering has increased dramatically. With the arrival of the *covid, the stock of floors in rent (offer) increased by 78%. In Barcelona, the offer has been multiplied by more than two. However, according to Idealist, in Barcelona the price requested by the owners has fallen by -9.4%. For its part, demand in the portal has also increased to levels close to supply.
But what is happening in the rental market and not in the advertisements? The only reliable available statistics, at least in some cities, are the deposited securities. Let us talk about the Barcelona case. Surprisingly, given the apparent increase in supply, the number of contracts signed suffers from a very significant drop. Up to the third quarter, a 25% reduction was accumulated, similar to the whole of Catalonia (20%). Here the mystery of invisible rentals: supply increases by 115%, but new operations fall by 25%. To complete the mystery, the rent price per month in the city of Barcelona has fallen by only 2.6% until the third quarter.
What is really going on in the rental market? Possible explanations for invisible rentals
What can explain this huge disparity between supply and market operations? We can raise some hypotheses to clarify the phenomenon of invisible rentals, but there is still no solution to the riddle. First of all, we can eliminate an explanation: the rent control came into force at the end of September and, therefore, its impact cannot yet be observed, because the bail data is only updated until the third quarter of 2020. One possible explanation would be a flood of tourist flats transformed into regular rents. If landlords continue to have excessive expectations about the rents that can be paid, influenced by the prices of when the home was tourist rental, then many of these offers will not have closed in a rental operation and we are still in the process. of adjustment of income expectations (as would reflect the large fall in prices demanded by landlords). However, this explanation is not entirely convincing, because many tourist homeowners switched to seasonal or monthly rentals to avoid entering into a five-year contract that would prevent them from taking advantage of the tour of tourism. Given that the profitability of tourist rentals is significantly higher than regular rentals, the cost of the pass can be significant. Only if the expectations of tourist homeowners have worsened could a massive transfer to the regular market be seen.
Another explanation for invisible rentals is that a substantial portion of the vacant housing stock has moved to rent. This could be reasonable given that for families who have suffered the impact of the pandemic on their economy, maintaining an unprofitable asset has an increasing cost. The problem is that the data we have on the proportion of empty homes show that their fall in Barcelona has been very small in recent months. Finally, the large increase in mortality, especially among older people, could be an advance on an increase in homes available for sale or rent. However, at this time it is still difficult to make an assessment, with confidence, of this effect. In any case, the problems that often characterize the transmission of inheritances – for example, frequent litigation between heirs – make it unlikely that the transfer to the market has occurred so quickly.
On the side of bail there are also factors involved. First of all, RDL 30/2020 establishes the possibility for the tenant to extend the lease in an extraordinary way. These extensions do not generate a new security deposit. In addition, in general, rents extend for a period less than the maximum extension and, also in these cases, there could be an increase in the effective duration of the rent, which would reduce the observation of registration. of new contracts. This is the most likely option. Another possibility is that many families were moving to rent outside the big cities. This process would be facilitated by the extension of telecommuting and the changing preferences of demand for more spacious and more light homes at a lower price. However, all the major cities around Barcelona reduce the number of bail deposits by between 16% and 27% compared to the same period in 2019.
With regard to rents, private agreements have been taking place between landlords and tenants since the beginning of the pandemic, reducing the agreed amount of payment and, in many cases, not being registered, which would indicate that the Rental prices are falling slightly more than bail statistics show. In short, many explanations for the same mystery.