Tenants in Spain face a financial crisis due to rising rents

Price increases are forcing renters to make difficult choices just 10 years after the country's last property crisis

People look at adds displayed on a real state agency in Madrid on September 25, 2018. Capsule flats, price rises forcing tenants out: rents in Spain are soaring post-crisis, fuelling concerns of a new "bubble" in a country still traumatised by the collapse of its housing sector. / AFP / GABRIEL BOUYS
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Rents in Spain are soaring post-crisis, fuelling concerns of a new "bubble" in a country still traumatised by the collapse of its housing sector.

Ruth Melida is in a jam. In April, she found out that the monthly rent of her flat where she lives with her unemployed husband and two children would rise from €605 (Dh140.04) to €999.

That leaves the family with under €200 to spare for other expenses. And the situation could get worse if her husband's unemployment benefits run out next month.

"What do we do, those of us who don't have the means? Do we go live in the woods?" asks the 41-year-old, who lives in San Sebastian de los Reyes outside Madrid.

Like her, more and more Spaniards are having trouble paying their rising rents, with many forced to move, particularly in Madrid and Barcelona, as they struggle on low salaries or benefits.

"People who have lived all their lives in a neighbourhood have to leave for increasingly peripheral districts that are adapted to their budget," warns Marta Montero, spokeswoman of an association for the right to housing in Madrid.

In the second quarter, rents rose 15.6 per cent year-on-year in Spain, according to real-estate website Idealista.

Since 2010, they have increased by 35 per cent in Barcelona and 30 per cent in Madrid.

"Every time I've left an apartment, its price has then risen 50 to 100 on Idealista," says Angel Serrano, a consultant in Madrid.

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Spain's Prime Minister Pedro Sanchez has promised a housing law whose exact details remain unclear but would likely include a rise in the minimum length of a rental contract from three to five years.

The leap in rents comes as Spain is still reeling from a devastating economic crisis that kicked off in 2008 when a housing bubble burst, leading to the eviction of thousands of indebted families who had bought their homes on credit.

As a result, "most people resorted to renting by necessity," says Beatriz Toribio, head of research for real-estate web portal Fotocasa.

One company caused a scandal this month in Barcelona, offering tiny, three-square-metre "capsule" rooms built one on top of the other in a house with shared living spaces for 200 euros a month.

According to the EU Eurostat statistics agency, 43 per cent of Spaniards who rent private housing spent more than 40 per cent of their earnings on rent in 2016, compared to an average of 28 per cent in the European Union.

"We're living in a rent bubble," says Ms Montero, who blames investment funds that have snapped up billions of euros in real-estate assets from banks, which themselves seized them from indebted families.

That's what happened to Melida's flat complex, which was social housing when she moved there in 2014 but was then snapped up by an investment fund that raised rents, forcing dozens of residents to leave.

They cannot pay the new rent and are waiting to be evicted.

This picture taken on September 25, 2018 shows signs reading "For sale" hanging from balcony and reflected on a miror in a shop in Madrid. Capsule flats, price rises forcing tenants out: rents in Spain are soaring post-crisis, fuelling concerns of a new "bubble" in a country still traumatised by the collapse of its housing sector. / AFP / GABRIEL BOUYS

But for Fernando Encinar, co-founder and head of research at Idealista, talking about a "bubble" is wrong as he says the current rise in rents is not due to speculation but the consequence of an economic recovery that began in 2014.

Spain forecasts economic growth of 2.7 per cent this after three years of growth of 3 per cent or over.

Mr Encinar says lower rental prices "weren't real" several years ago and corresponded to "a crisis situation".

From 2010, thousands of homeowners chose to rent out their places rather than sell them as there were no buyers in a country where the norm had been to own your flat or house, and they had to charge low prices.

Still, faced with the current rise, Madrid's left wing city hall is battling Airbnb-type seasonal rentals they accuse of driving up prices.

The city hall in Barcelona is trying to encourage owners of empty housing to rent their properties out.

Far-left party Podemos, meanwhile, has submitted a bill in parliament regulating rents and banning the eviction of tenants who cannot be re-housed.

But others say that's not the solution.

Ms Toribio says more social housing should be built in a country where it only represents 2.5 per cent of all housing, according to the Housing Europe foundation.

The government wants to build 20,000 units of social housing in four to six years.

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Portuguese protest over rising short-term tourism rentals

Protests against soaring short term tourist rentals and rising rents drew hundreds of people in Lisbon last Saturday, Lusa news agency reported.

"Rein in rents, stop expulsions" and "enough tourism rentals" were slogans brandished by those joining the march in the capital, which was attended by several hundred people.

A smaller demonstration in the northern city of Porto saw a few dozen people turn out.

"People are becoming increasingly aware of the extent of the problem - but political measures are needed to turn things around," says Ana Gago of the "Stop despejos" (stop expulsions") pressure group.

"Real estate speculation is driving people out of the centre of town. Property can't be a business - it's an essential good," insisted another protester, Joana Dias.

Marchers demanded the authorities limit the amount of properties being withdrawn from the long-term rentals market for use as more lucrative tourist versions on online sites, such as Airbnb.

Organisers said some 15,000 such properties are being advertised on rental platforms in Lisbon - around three quarters of them purely for tourist use.

A similar scenario in other cities, not least Paris, has also led to protests. Earlier this month the Paris city council member in charge of housing said he would propose outlawing home rentals via Airbnb and other websites in the city centre, accusing the company of forcing residents out of the French capital.

Business daily Jornal de Negocios said around a third of apartments in Lisbon's historic centre have been given over to tourism.

Housing rights activists are critical of measures put in place by the former conservative government during the 2011 financial crisis in order to attract foreign investors to the Portuguese real estate sector.

But the current socialist administration has said it not planning to overturn those measures, which include tax sweeteners for foreign retirees and golden visas for non-EU property investors.

After the financial crisis real estate prices in Portugal have shot back up, adding 5.6 per cent in 2015-2016 and then another 9.2 per cent last year, according to a recent report by Spain's Caixabank.