Until now, Spain has been a country of homeowners. However, sector experts believe that renting will gain ground over the next few years, some because they will choose this way of life, others because they will have no other options due to the impossibility of accessing the necessary financing to be able to become homeowners.
To date, according to data from Atlas Real Estate Analytics, the percentage of people aged between 30 and 44 who live in rented accommodation is 34.07%, and it is predicted that, by 2025, this ratio will reach 40.33%. This would represent an increase of 64.9% in just ten years, given that in 2015 almost a quarter of the population of the same age group lived in rented accommodation.
This evolution intensifies in the case of the population under 29 years of age, as it is expected that 63.4% will be living in rented accommodation by 2025. Today, Generation Z already prioritises renting over buying, with a ratio of 58.2%.
According to data from Atlas Real Estate Analytics, the population between 45 and 64 years of age will barely live under the rental modality in 2025, compared to 15% in 2015. In the case of people over 65 years of age, renting will be anecdotal at 6%.
“Rental trends are evolving towards a behaviour similar to that of the major European powers such as Germany, which has a higher percentage of the population renting than Spain, so there is still great potential for growth to reach figures like those of these countries,” says Alejandro Bermúdez, CEO of Atlas Real Estate Analytics.
However, for this to happen, it is necessary to expand and develop a new stock of rental apartments, as the current stock is insufficient and, in most cases, obsolete. “We have identified in the Build to Rent market a need for the development of up to 991,545 homes to reach the average European rental population, and 1,841,440 to reach the average of the main powers such as Germany, France or Italy”, says Bermúdez, who assures that this new supply is mainly aimed at young people, who “either due to a lack of resources or for cultural reasons do not want to buy a home of their own. In this case, we believe that it is mainly a question of inaccessibility, since, culturally, Spain has always been committed to property ownership”.
Indeed, although in most cases the mortgage payment is lower than the rent, many young people cannot afford to buy because they cannot afford the down payment, which is not affordable for everyone, especially if they do not have family support to help them raise 30% of the cost of the operation.
Nowadays, the most normal thing is that a mortgage is granted for 80% of the approved appraisal value of the property to be purchased. Therefore, the buyer needs to have their own funds to cover the remaining 20% of the purchase value that is not financed by the bank. Also to be taken into account is the payment of VAT, which in the case of a new home is 10%, or Transfer Tax (ITP), if it is second-hand, as well as notary or registry fees.
The problem of access for young people is reflected in the statistics, as only 8.17% of the total number of mortgages signed in 2021 correspond to those under 35 years of age, according to Hipoo. This is in addition to the percentage of under-35s who have applied for a mortgage, which has decreased by 2% compared to 2020, to 43%.
According to Hipoo, of the total number of applications made by those under 35 years of age (with a debt ratio of no more than 35%), the percentage of young people requesting more than 80% financing in 2021 was 54.19%, 6.5 points higher than in 2020. For those requesting between 80 and 90% of funding, the percentage was 21.76%, up from 18.89% last year. And those requesting more than 90% financing accounted for 32.43% in 2021 compared to 28.8% in 2020.
But despite the barriers to acquiring a home, young people are not giving up hope. In this sense, Ricardo Sousa, CEO of Century21, assures that when working with young people, “the future perspective continues to be the purchase of a home”. “84% of young millennials and generation Z want to buy in the future and have that feeling of ownership, which is something very cultural in Spain. If we go to France, the dynamic is different and even with inverse figures”.
The expert explains that in his real estate network, “more than 70% of the transactions we do with young people are for sale and purchase”. Sousa also points out that this part of the population has an average budget of fewer than 700 euros per month to pay the mortgage, and their access to the purchase market is in most cases backed by family support to be able to provide the necessary initial savings. “In this way, for renting to be competitive, it would have to be below these values, and even then, we would be talking about a high rate of effort”, says the CEO of Century21.
Along the same lines, the economist Gonzalo Bernardos, considers that young people want to be homeowners. “This does not mean that they want to buy at the age of 25, but nobody wants to live in worse conditions than their parents and what they have seen at home is that the family owned a home”, explains the expert, who points out that it is true that “the desire to buy has been delayed because in life everything has been delayed. Before, a young person was someone under the age of 30, and now it is someone under the age of 40. In addition, there have been two major crises in between and the millennial generation, which I call the jinx generation, have been caught in both of them, so with economic circumstances worse than those of their parents, they are resigned to living in rented accommodation”.
However, not everyone chooses to rent out of obligation; there are also some young people who prefer this way of life. This is explained by Borja Varela, Director of Alternative Assets at Colliers International Spain, who recognises that traditionally “due to our culture, Spaniards have tended to buy housing as a defensive method”.
But the buying trend among young people is “changing radically because they do not have the savings capacity that they had before, as salaries are not in line with the price of houses”. However, the manager assures us that some young people are looking for flexibility in renting.
