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Mounting concern over rising rents in Spain

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'For sale' hanging from a balcony of a building in Madrid. In the second quarter, rents rose 15.6 per cent year-on-year in Spain. Since 2010, they have increased by 35 per cent in Barcelona and 30 per cent in Madrid.

Madrid

CAPSULE flats, price rises are forcing tenants out. Rents in Spain are soaring post-crisis, fuelling concerns of a new "bubble" in a country still traumatised by the collapse of its housing sector.

Ruth Melida is in a jam. In April, she found out that the monthly rent of her flat where she lives with her unemployed husband and two children would rise from 605 to 999 euros (S$970 to S$1,600).

That leaves the family with under 200 euros to spare for other expenses. And the situation could get worse if her husband's unemployment benefits run out next month.

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"What do we do, those of us who don't have the means? Do we go live in the woods?" asks the 41-year-old, who lives in San Sebastian de los Reyes outside Madrid.

Like her, more and more Spaniards are having trouble paying their rising rents, with many forced to move, particularly in Madrid and Barcelona, as they struggle on low salaries or benefits.

"People who have lived all their lives in a neighbourhood have to leave for increasingly peripheral districts that are adapted to their budget," warns Marta Montero, spokeswoman of an association for the right to housing in Madrid.

In the second quarter, rents rose 15.6 per cent year-on-year in Spain, according to real-estate website Idealista. Since 2010, they have increased by 35 per cent in Barcelona and 30 per cent in Madrid.

"Every time I've left an apartment, its price has then risen 50 to 100 euros on Idealista," says Angel Serrano, a consultant in Madrid.

Spain's Prime Minister Pedro Sanchez has promised a housing law whose exact details remain unclear but would likely include a rise in the minimum length of a rental contract from three to five years.

The leap in rents comes as Spain is still reeling from a devastating economic crisis that kicked off in 2008 when a housing bubble burst, leading to the eviction of thousands of indebted families who had bought their homes on credit.

As a result, "most people resorted to renting by necessity", says Beatriz Toribio, head of research for real-estate web portal Fotocasa. One company caused a scandal this month in Barcelona, offering tiny 32 square-foot "capsule" rooms built one on top of the other in a house with shared living spaces for 200 euros a month.

According to the EU Eurostat statistics agency, 43 per cent of Spaniards who rent private housing spent more than 40 per cent of their earnings on rent in 2016, compared to an average of 28 per cent in the European Union.

"We're living in a rent bubble," says Ms Montero, who blames investment funds that have snapped up billions of euros in real-estate assets from banks, which themselves seized them from indebted families.

That's what happened to Ms Melida's flat complex, which was social housing when she moved there in 2014 but was then snapped up by an investment fund that raised rents, forcing dozens of residents to leave.

They cannot pay the new rent and are waiting to be evicted.

But for Fernando Encinar, co-founder and head of research at Idealista, talking about a "bubble" is wrong as he says the current rise in rents is not due to speculation but the consequence of an economic recovery that began in 2014.

Spain forecasts economic growth of 2.7 per cent this after three years of growth of 3 per cent or over. Mr Encinar says lower rental prices "were not real" several years ago and corresponded to "a crisis situation".

From 2010, thousands of homeowners chose to rent out their places rather than sell them as there were no buyers in a country where the norm had been to own your flat or house, and they had to charge low prices.

Still, faced with the current rise, Madrid's left wing city hall is battling Airbnb-type seasonal rentals they accuse of driving up prices. The city hall in Barcelona is trying to encourage owners of empty housing to rent their properties out. Far-left party Podemos, meanwhile, has submitted a bill in parliament regulating rents and banning the eviction of tenants who cannot be re-housed.

But others say that's not the solution. Mrs Toribio says more social housing should be built in a country where it only represents 2.5 per cent of all housing, according to the Housing Europe foundation.

The government wants to build 20,000 units of social housing in four to six years. AFP