With the start of 2023, many real estate market agents agree that a change of cycle has begun in the market that is linked to the macroeconomic situation caused by the war, inflation and the rising cost of living and financing. In this context, Inviertis, a real estate investment technology platform, predicts that the future of the economy and the Spanish real estate market will be marked by one main factor in this financial year: the evolution of the price of raw materials. But what about the rental market in particular? How much does it cost to rent in Spain in 2023? According to Inviertis, rental prices in Spain will rise by 6% in 2023. We have the details.
In general terms, to begin with, the company predicts a cooling of operations for the first half of the year and assures that the second half of the year will see an acceleration of transactions during which the market will recover a good part of the operations postponed by demand due to the uncertainty of the current moment. This is similar to what happened during the second half of 2020, when transactions were reactivated with the gradual relaxation of health measures to combat the pandemic. The consultancy firm CBRE has also taken the same line, stating that the demand for property sales and purchases will fall by 29% this year.
“The year has started in a favourable environment for investment. Despite investors’ natural caution and the current financing barriers, the number of transactions remained stable in 2022 and even increased slightly in the final stretch of the year. Real estate investment continued to be a refuge from inflation for those who have liquidity and need to protect their wealth. In fact, only 20% of investors decided to leverage their investments via financial credit,” says Rebeca Pérez, CEO of Inviertis.
“The more difficult the environment, the more opportunities real estate professionals will have to take advantage and improve our work. We are looking forward to a 2023 that will go from less to more in the number of residential asset sales and that will consolidate trends that are still in the process of maturing and that will be the basis of the new real estate cycle that we are entering”, says Vicenç Hernández Reche, adviser to Inviertis and CEO of Tecnotramit.
Property prices Spain: rent will rise and buying will remain stable
In this context, as indicated by the organisation, adjustments have been noted in the purchase price due to the fall in demand, which will offer a better return to those who can invest in housing. In fact, during this year this indicator will continue to be very susceptible to the evolution of buyers’ interest. Less pressure from demand will generate price adjustments in those areas where supply has not been absorbed, but will remain stable in the most dynamic markets.
On the other hand, Inviertis stresses that the high rental prices in large cities is a problem that could be solved by increasing the available supply. In this regard, the company says that no changes are expected on the legislative or fiscal horizon, so they do not expect downward corrections, but rather the opposite: the company expects an average year-on-year increase of 6% in the average rental price in the event that the tightening of mortgage financing conditions does not curb its escalation and continues to increase interest in the rental of housing to the detriment of its purchase. “Landlords are more willing to adjust the price rather than raise the rent because of their interest in keeping a good tenant and continuing to make their asset profitable without any surprises. It is the owners of empty properties who are driving the price increase,” says Pérez.
Profitability of 7% and deals close in 30 days
In terms of profitability, there has been an upward trend in the profitability of investment in the residential sector in Spain. Over the course of 2022, this indicator climbed to 7-9% in some of the large cities, mainly due to adjustments in the sale price. These yields will be higher in areas where there is a slowdown in sales price increases. However, according to data from Inviertis, the limitation on the rise in the CPI in force throughout 2023 will leave the average profitability at a national level at 7%, but with much more loyal tenants. Politicians such as the housing minister of the Community of Madrid have expressed their opposition to this limitation.
“At the moment, our investors spend around 30 days to find an investment opportunity on our platform. However, it is becoming increasingly common to see investors taking less than 20 days to invest and even deals closing just 24 hours after an asset has been published. Those who are looking for a property to invest in don’t think too much when they see an opportunity,” concludes Pérez.