Spain | PRS | Private Rented Sector 2019
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PRIVATE RENTAL SECTOR 2019 Private Rented Sector Spain 2019 A GROUND-BREAKING OVERVIEW OF THE PRIVATE RENTED SECTOR IN SPAIN LOCATION, STRUCTURE, DATA POWERED BY RESEARCH RETAIL RESEARCH PRIVATE RENTED SECTOR 2019 Welcome to our report Private Rented Sector Spain 2019 night Frank is delighted to present this report outlining the key figures for the private rented housing sector – an up and coming asset class that is quickly gaining traction in the Spanish mar- ket. We firmly believe that this real estate segment will offer at- Ktractive opportunities for investors who, with the help of professional advi- sory services, are able to correctly position themselves at this early stage. This is precisely why we have created a specialist team that will be solely dedicated to this segment – the first of its kind in the Spanish rental market. We have combined the local expertise of our two main business areas – Capital Markets and Residential – and work in close collaboration with our PRS (Private Rented Sector) teams in the UK and the US, where we are market leaders in PRS, with over 150 professionals solely dedicat- ed to this area. In terms of Big Data, we have teamed up with urban Data Analytics, the leading data analysis firm that focuses on detailed real-time understanding of the sector. This report outlines some of the key takeaways for the rental market in Spain, looking at both the current climate and its future development. It also examines the strategic locations that could present attractive op- portunities, both for renters and varying investor groups. We are certain that this report will prove invaluable for all of our clients and will spark further debate regarding the numerous opportunities that this sector holds for the future. In the meantime, we hope you enjoy the read. Carlos Zamora Jorge Sena Partner, Head of Residential Partner, Head of Commercial 2 | KNIGHTFRANK.ES KNIGHTFRANK.ES | 3 RESEARCH PRIVATE RENTED SECTOR 2019 Graph 1 / % population spending > 40% of income on rent in Europe / 2017 Graph 3 / % Population renting in Europe / 2017 90% Source: Eurostat Source: Eurostat Spain 80% 0% - 10% 10% - 20% Serbia vs 70% 20% - 30% 30% - 40% Norway 60% ≥ 40% Europe United Kingdom 50% Switzerland 40% Finland In recent years, Spain has 30% Slovakia started to witness a shift away 20% Slovenia from homeownership towards renting, and although levels 10% Romania are still a far cry from the Portugal European average, there remains 0% Italy Poland Spain Ireland France Austria significant scope for this sector Poland Croatia Finland Greece Norway Bulgaria Sweden Belgium Portugal Hungary Romania Romania Denmark Germany Germany to expand further in Spain. Switzerland Austria Czech Republic United Kingdom The Netherlands EU (28 countries) The Netherlands Hungary ccording to the latest available data, In 2010, the average percentage of people try with the highest percentage of tenants is Luxembourg the number of homeowners over renting in the EU stood at 29.4%, a figure which Germany, where close to 49% of the popula- Lithuania the last seven years, both in the Eu- has since risen to 30.7%. Although this figure is tion rents. This is followed by Austria with 45%, ropean Union and Spain, has fallen lower in Spain, it has also increased, climbing Denmark with 37.8%, and France with 35.6%. Latvia Aconsiderably, while the number of people rent- from 20.2% in 2010 to the current 22.9%. In contrast, eastern European countries such Italy ing has risen – an increase that has been more These figures include rents both at and be- as Romania, Croatia and Slovakia have the low- prominent in Spain (up 13.4%) than the rest of the low market price, and social rents. Focusing est percentage of renters, with 3.2%, 9.5% and Croatia European Union (up 4.4%). on specific countries within the EU, the coun- 9.9% respectively. France Spain 22.90% Graph 2 / Variation in tenure in Spain Greece and the EU-28 / 2010 - 2017 Ireland As PRS investment demand takes off across Europe Estonia - international mobility is on the rise and urban Source: Eurostat HOMEOWNERS Germany populations are expanding - there is an ever greater need for Denmark new supply and better quality product. Cross-border capital ESP -3.3% EUR -2.0% Czech Republic flows are tapping into this trend and growing, and residential According to the most recent data, Spain is cur- (84%), Romania (60%) and Bulgaria (51%). Bulgaria investment strategies in Europe are increasingly appearing on rently ranked 17th, having climbed four positions Over the last year, the percentage of Euro- in the last 10 years. peans spending more than 40% of their income RENTING OR OTHER Belgium investors’ radars.” Overall, 42% of Spanish renters spend more on rent fell by 3% on average. The percentage ESP 13.4% than 40% of their income on rent. The European fell significantly, albeit remaining above average, 0% 20% 40% 60% Stuart Osborn | Partner. European Residential Investment Group EUR 4.4% average stands at close to 26%, with this figure in countries such as Italy and Portugal, while in being much higher in countries such as Greece Spain, the figure remained almost unchanged. 4 | KNIGHTFRANK.ES KNIGHTFRANK.ES | 5 RESEARCH PRIVATE RENTED SECTOR 2019 Graph 5 / Renters and housing Rented housing | total housing stock in major cities / q1 2019 Source: Knight Frank Research | urbanData Analytics demand BARCELONA PALMA MADRID ZARAGOZA MALAGA BILBAO SEVILLE Rental housing demand spiked following the onset of the financial 30.76% 24.15% 19.75% 14.67% 11.58% 11.54% 10.78% crisis, however, time has proven that rental housing is a stable investment product, capable of generating recurring income and maintaining occupancy rates. espite the deep-rooted tradi- In 2013, the number of rented homes ac- People aged 16 to tion of homeownership among counted for 21% of total housing, while today Spaniards, the financial crisis this figure stands at over 23% for the whole of 44 account for the sparked the start of a market Spain. In terms of autonomous regions, 36% largest share of Dshift towards renting. People suddenly be- of homes are rented in the Balearic Islands, gan to view it as a viable option, and in fact and roughly 30% in Catalonia, Ceuta and Me- renters in Spain. continue to do so today. A good example of lilla. These are followed by the Canary Islands this – aside from the rising number of peo- and the Region of Madrid, which are approxi- ple opting to rent – is the rising number of mately 3 percentage points above the average households in the private rented sector. The figure for Spain. However, in the Basque Coun- average number of people renting per home try, Cantabria and Castilla y León, the propor- is estimated at approximately 2.5. tion of rented homes stands at below 18%. If we focus on the main cities in Spain and Graph 4 / % Rented primary residences. Autonomous regions / 2018 look at the total housing stock – whether pri- Graph 6 / Variation in % renters in Spain by age group / 2007 vs 2017 mary or secondary residences – we can see that the biggest rental market is found in Bar- Homeowner Renter Source: INE % homes rented Source: INE celona, where almost 31% of homes are rented. This is followed by Palma, with 24%, and third- 120 40 placed Madrid where close to 20% of homes 100 35 are rented. In Palma, a significant share of its rented 30 homes are used as tourist accommodation, 80 an especially important factor to consider in a 25 country like Spain where tourism is the main 60 20 national industry. The 16-29 age group boasts the largest 40 15 share of renters, with 74% of total households in this age bracket falling into the rented hous- 10 20 ing category in 2017 – a figure that significantly 5 outstrips the 42% recorded in 2007. 0 There has also been a sharp rise in the num- 2007 2017 2007 2017 2007 2017 2007 2017 0 ber of people renting in the 30-44 age bracket, 16-29 30-44 45-65 >65 Ceuta years years years years Melilla up from 26% to 36%. Galicia Murcia Aragon Navarre Navarre La Rioja Asturias Catalonia Cantabria Andalusia Extremadura Castilla y León Canary Islands Balearic Islands Basque Country Region of Madrid Region of Valencia Region of Valencia Castilla -La Mancha 6 | KNIGHTFRANK.ES KNIGHTFRANK.ES | 7 RESEARCH PRIVATE RENTED SECTOR 2019 Madrid / Graph 7 / Average rental price by province (Top 10) €/sqm/month / q1 2019 Graph 9 Rents by district in Madrid / q1 2019 While the highest rents in Madrid are found Variation Source: Knight Frank Research | urbanData Analytics in the centre of the city, the outskirts of the capital are where more competitive rents can < €13 per sqm/month be found. Rents are most expensive in the €13-15 per sqm/month Central, Salamanca and Chamberí districts, in rents 16 €15-16 per sqm/month where average prices stand at circa €18.80 €16-17 per sqm/month 14 per sqm/month. > €18 per sqm/month 12 Vicálvaro, Villaverde and Villa de Valle- cas are at the other end of the spectrum and 10 he rental market is expanding at a home to the city’s most affordable rents, with faster pace than the buyer market. 8 prices closer to €10.50 per sqm/month. Over the last year, rents have risen most The average cost of renting in Spain 6 stands at €10.7 per sqm/month, up in the Madrid districts located between the 4 20%T on the maximum recorded in 2007. The M-30 and M-40 ring roads.