Banco de España Occasional Paper No 2110
This paper examines developments in the residential rental market in Spain since the economic crisis that began in 2008, and complements the main analyses on this market discussed in Chapter 4 of the Banco de España’s Annual Report 2023. The analysis presented documents an expansion of the rental market concentrated among certain groups (young people and the foreign-born population) and geographical areas (urban and tourist areas). Since 2015, these developments have occurred alongside an increase in average rental prices that has been especially intense in urban areas. The observed price dynamics are the result of faster growth in demand than in supply, which is not keeping pace. Among the main determinants that explain the rise in demand for rental housing are demographic growth and the concentration of the population in large urban areas. At the same time, a portion of residential demand is shifting to the rental market, as financial institutions excercise a prudent approach to extending mortgage loans. Meanwhile, the supply of residential rentals in the hands of private individuals who are not large property owners has grown substantially over the last decade. However, this increase in supply has been limited by the rise in alternative uses of housing (tourist, room and seasonal rentals), the limited stock of social rentals and the tepid investment by the institutional private sector in the residential rental market. As a result of these developments, the Spanish economy stands out among the EU-27 economies for the significant proportion of tenant households that are overburdened by rental costs. Such overburdening is concentrated among lower-income households, and young people in particular, and in areas with higher levels of economic activity and tourism.