Spain's rental sector gains weight

Content available in
December 5th, 2013

The rental sector is relatively insignificant in Spain. In 2012, 20.8% of Spanish households lived in rented accommodation, a level considerably lower than the 33.0% for the euro area as a whole. In fact, the distance compared to German rented homes (46.7%) and French (36.3%) is even greater. Economic literature indicates that a more dynamic rental sector could be beneficial for the economy: it would increase the geographical mobility
of workers and reduce the excessive concentration of resources in the construction industry.

The factors influencing the decision of households to buy or rent a home can be highly disparate in nature. Spain's cultural bias towards owning one's own home, together with easy mortgage facilities prior to the recession, pushed the ratio of home-owning households above 80% in 2007. Other factors also contributed to this ratio being reached: fiscal policy clearly encouraged the acquisition of housing and, at the same time, the limited efficiency of the judicial system reduced the supply of rental accommodation (see table). In this respect, the 2011 census showed that a high percentage of homes remained empty (13.7% in Spain compared with 4.4% in Germany).

However, figures from the last few years show that the percentage of households that own a home has fallen slightly, from 80.5% in 2005 to 79.2% in 2012. This is a moderate fall (in Ireland it has fallen by eight percentage points over the same period). Among the youngest population, however, the drop has been significant: going from 58.1% in 2007 to 47.7% in 2012. For the population as a whole, an analysis of the flows of new households shows more significant changes in home ownership. Between 2010 and 2012, the rise in the number of households that owned a home accounted for 56.7% of all households created, a significantly lower figure than the 81.1% recorded between 2006 and 2008.

The figures therefore indicate that the Spanish rental sector has gained relative weight over the last few years. It is true that part of this rise might be corrected to a certain extent as the economic and financial conditions improve for households. However, we expect the reforms adopted by the Spanish government in the last few years, such as the elimination of tax deductions for buying a primary residence and the new rent laws, which make the sector more flexible and give greater protection to landlords, will help this trend continue.