Are you here for long?

Mar. 13, 2020

The increasing number of properties up for short-term rental is pushing long-term rental prices up as supply becomes more constricted.

Travel and tourism are some of the leading engines of growth in the Spanish economy. In 1Q2019 alone, the Ministry of Tourism reported that tourist spending totaled EUR15.4 billion. Data from the 2017 Outlook report for international tourism showed that the annual number of visitors entering Spain reached new heights, totaling 82.6 million arrivals and making it the world's second most popular travel destination. About half of these visitors come from the UK, Germany, and France.

This number is predicted to keep rising. Without limitations on the number of tourists entering the country, it is proving hard to meet the high demand for short-term accommodation rentals. As a result, locals are being pushed to find residence outside central cities.
Large cities such as Madrid and Barcelona are being hit by this the hardest. This is unsurprising given what Spain has to offer: popular cuisine, political stability, optimal weather conditions, and positive communication links. Prominent Spanish newspaper El Pais' research found that almost 20% of homes in Sol, a central neighborhood in Madrid, were listed on Airbnb. Throughout the rest of the capital the figure is close to 10% of all properties.
As a result, rent prices in central cities are reaching new highs since before the 2008 financial crisis. Real estate website, Fotocasa, examined this phenomenon in Madrid and its surrounding towns and found that 19 of the 27 towns analyzed registered a rise in rents last year. Renting in Madrid now comes to an average of EUR13.09 per sqm, costing Madrileños EUR5 more per sqm than the national average.
Despite losses for residents looking to live in central areas, holiday rental apartments are proving to be a lucrative business. Inevitably this encourages landlords to rent their properties to tourists looking for short-term stays rather than to long-term tenants. Different regions are tackling the problem locally but almost always the solution lies in tighter regulations.
Of the most popular solutions proposed is capping the number of beds available to tourists. In Palma de Mallorca, tourist apartment rentals have been confined to single family homes in certain areas. In Madrid, the Mayor Manuela Carmena has proposed similar measures that are set to affect 95% of rental homes. Amongst them is the plan to limit short-term lettings to the 'central almond' of Madrid, the ring-road around the M-30.
Barcelona has been struggling with the influx of tourists for much longer, with an estimated 20 million visitors flocking to the city each year. A Catalonian town hall poll found that Barcelona's 1.6 million residents considered tourism the single biggest threat to their city. The city's mayor Ada Colau, a former housing activist, has made housing a priority. Perhaps the most notable of her measures are plans to increase the supply of apartments, while also reducing car pollution in the central city by building superblocks, starting in the Eixample district.
There are few central cities that are left unaffected by tourism. In economic terms, this is good for the country. Testament to this is the growth Spain has experienced post-crisis. According to figures published by the National Institute for Statistics, in the first trimester of 2019 there were 2.5 million jobs linked to the tourism industry, representing a 2.8% increase YoY. This figure is set to continue rising, making long-term economic prospects look promising for the nation. However, this trend also coincides with related issues including depopulation as a result of urbanization. This phenomenon has spread across smaller towns and villages, seriously putting their survival at risk. Some 26 provincial capitals are reportedly losing inhabitants. The emerging phenomenon, La España vaciada, had approximately 50,000 travel to Madrid and take to the streets to demand a cross-party plan to tackle the issue. If the government does not find the right balance between welcoming and regulating tourism, it risks both discouraging tourism as well as upsetting its citizens.