Spain needs €250,000,000,000 of investment in order to meet demand for rental accommodation

Spain needs €250,000,000,000 of investment in order to meet demand for rental accommodation

Spain has a serious lack of residential property available for rent. During the next two decades, the local real estate market will need huge, multi-million dollar investments in order to bring supply in line with demand.

Currently, every fourth family in Spain lives in a rented dwelling. It is estimated that housing rentals will only gain popularity among buyers, leaving classic property purchases far behind.

This is due to factors such as rising real estate prices and difficulties in getting a mortgage loan. Socio-cultural changes in Spanish society also have an impact, pushing people to be more mobile, and, as a result, less attached to their own homes.

Several market experts spoke about the problems and reasons for these changes in the market during the SIMA Pro event held under the Madrid Real Estate Exhibition.

Teresa Marzo, CEO of Elix, a leading Spanish investment management group, said: “Today, about 4.5 million Spanish families live in rented homes. It is about 24% of the total population. In the next few years, that growth will continue and bring us closer to the European level of 35%. In the next 20 years, we need to create around 2,000,000 houses for rent, or 100,000 each year, in order to meet demand.”

Colliers, a diversified professional services and investment management company, estimates that this task will require about €250,000,000,000 of investment. This is significantly higher than €170,000,000,000 the amount budgeted by the Spanish government in 2022.

Antonio de la Fuente, Managing Director in the Corporate Finance department at Colliers, adds: "To achieve this investment goal, it is necessary to attract public investors, as new housing development is still at a very low level in the country."

According to the Spanish Ministry of Transport, Mobility and Urban Development (MITMA), about 108,000 new residential units were subsidized in 2021. 97% of them were created directly for sale. According to forecasts, in 2 years the volume of rental housing subsidies should rise to 13% (note: from the current rate of 3%).

Long-term government regulation

Market representatives insist on the need to create a complete regulatory and legal basis for the stable and strong sector’s development, to attract international investors who are ready to invest in the rental sector, and to create opportunities for the sale of a large amount of real estate as soon as possible.

Antonio de la Fuente emphasizes: “Today, Spain is in a highly competitive environment when it comes to attracting investment. Within Spain, autonomous communities and provinces compete with each other. As a country, we should be able to create a sustainable and enabling environment for attracting investment. A fairly clear, full normative basis, with a certain degree of flexible regulation, will allow us to mobilize hundreds of millions of euros in investment.”

In her turn, Teresa Marzo insists that major international players interested in the housing sector plan their investments over the long term. For this reason, she emphasizes the need for the Spanish government to focus on legal frameworks that are easily understood, long-term market regulation, and to give up short-term political solutions.

She notes that the residential sector cannot rely on those who have power today. The sector should develop regardless of the political situation. With this, it signals to international investors that their contributions will have government guarantees and long-term benefits.

Eduardo Guardiola, Managing Partner of Catella Investment Management, and Jesús Ruiz, Senior Development Director at Greystar, took the platform provided by the conference to encourage the government to be more flexible in licensing policies and urban development plans. They called for bringing more land for residential development to the market, improving conditions for taxing rental property, and promoting the digitalization of the sector to combat bureaucratization.

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