Madrid and Barcelona could see a reduction in rentals because of government decreee

This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

The worst fears for the rental market in Madrid and Barcelona could be coming true. The Royal Decree Law on rent measures approved by the Government of Pedro Sánchez in March is already causing a reduction in the supply of housing in Madrid and Barcelona, ​​according to Blackstone, one of the main investors in the sector.

"It is already happening, there is a clear reduction of supply in Madrid and Barcelona, ​​and an increase in rents, and that the market was already beginning to self-regulate, as a consequence of the real-decree law of the Government," said Eduard Mendiluce, CEO of Aliseda and Anticipa, Blackstone asset managers in Spain. "Be careful to overregulate, because in these markets in which it was investing it will do a lot of damage," Mendiluce has warned in the forum The future of the housing rental market, organized by EXPANSIÓN and sponsored by Aliseda, Idealista, Azora and Asipa.

Both companies and investment funds warned months ago of the effects of the royal decree. Among them, they warned that the extension of the term of the contracts -to five years, if the owner is a natural person, or to seven if it is a company- can cause additional increases in rents to compensate the quasi-freeze of rents for several years, since that the annual update of the rental price may not exceed the CPI variation.

Other actors in the sector, however, consider that "lengthening contracts does not have to be a negative measure, since it gives more stability to the tenant, but also to the owner," says Beatriz Toribio, Director of Estudios de Fotocasa. "What someone who is dedicated to this wants is to have stable tenants, the rotation is negative, unless you want to walk towards an uncontrolled price escalation," agrees the Secretary General of Housing, Helena Beunza, in an interview with this newspaper.

Another possible collateral effect of the government's measure, as the main investors in the sector (Blackstone and Azora) and also the Administrators of Fincas in Madrid, among others, have warned, is that "it will provoke the withdrawal of the rental market from numerous homes". This is a problem, considering that in the coming years the formation of 150,000 families per year is expected, of which a third will live on a rental basis. "It is also expelling tenants with lower levels of solvency and discourages the creation of platforms," ​​Mendiluce has warned.

Price ceiling

A question that remains in the air, in full negotiation of support from Sanchez to form a government, is what will happen with an eventual control of prices of rents, a measure that has been implemented by European capitals such as Berlin or Paris and that receives the frontal rejection of the main players in the sector.

Now that the acting president, Pedro Sánchez, negotiates a programmatic agreement with the leader of Unidas Podemos, Pablo Iglesias; the purple formation could press with measures like the control of prices in exchange for its support. The price ceiling for rents was the sine qua non condition of Podemos to approve the royal decree and it does not close the door to price control, but through incentives or tax liens, an option that the PSOE does not see badly.

The sector would also not look badly on a system of tax incentives and bonuses based on the official price statistics that the government is preparing, according to Mendiluce, who also proposes that "in case of social emergency there may be a clause that allows rental contracts with prices below market, but of shorter duration ".

This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

Join us November 12-15 for the Property Portal Watch Conference Madrid 2019.