Catalonia is one year old this week since the entry into force of the law that limits rental prices. The data for the second quarter of 2021 consolidate the trend observed after the shock of the pandemic: the number of contracts being signed is very high – that is, regulation has not paralyzed supply – and prices are falling, especially in Barcelona and less in the rest of the community. In addition, a total of 75 municipalities, including the most populous, have requested to remain under the influence of regulation for the next five years.
The Government resorts to the Constitutional law of Catalan rentals, but does not suspend it
The law came into force half a year after the pandemic broke out. This has caused both the Generalitat and independent analysts to be cautious when linking market trends to the effect of regulation. The COVID-19 crisis has introduced factors such as the entry into the tourist apartment rental market, a greater conservatism of the owners or a rebound effect after a lockdown in which the activity collapsed.
Even so, a conclusion emerges that the promoters of the law, such as the Tenants Union, claim: the rental market in Barcelona is far from paralyzed, as predicted by the real estate sector.
The law limiting rent price increases, which is currently being appealed to the Constitutional Court –although the Government ruled out requesting its suspension–, established a ceiling on the rise in monthly payments initially for 61 municipalities. These are considered as the area of the stressed housing market and include Barcelona, almost its entire metropolitan area and the provincial capitals. Throughout this year, in these municipalities the price of new rental contracts could not rise above the benchmark index and even had to be lowered if it was above it.
With data from the Catalan Housing Agency, which now depends on the Department of Social Rights, it is observed that in the second quarter the contracts signed in Catalonia were 42,184, 2.4% lower than in the previous quarter (43,239) , but 100% higher than the same period in 2020 – the hardest of the pandemic, which stood at 21,053 – and even 4.4% more than in 2019, when there were 40,394.
In Barcelona, contracts exceed 14,000 for the second consecutive quarter. There is a slight quarter-on-quarter drop, of 2% to 14,110, but the volume of new rentals remains unprecedented (the 14,000 barrier had never been exceeded in the historical series of the Catalan capital).
From the real estate sector, however, they have reacted quickly to the anniversary of the legislation and the Spanish Association of Real Estate Personal Shopper (AEPSI) has warned that a collapse in the supply of housing. Although the Housing Agency does not have official data on apartments for rent (it only has them from the signed contracts and their price, because it obtains it from the deposits deposited), AEPSI has assured that the offer has contracted 40% in the Catalan capital.
As for prices, the Catalan capital continues to lead the reduction. The average monthly payment in the city is 903 euros, a very small decrease compared to the 905 of the previous quarter but significantly far from the 960 of that same period in 2020 or the 969 of 2019. If instead of quarters it is calculated by semesters, As offered by the Catalan Housing Agency, the fall compared to last year is 7.1%, while in the rest of Catalonia it is 2% (or even 1% if the entire metropolitan area is not counted) .
At this point, the detractors of the regulation recall that prices also drop significantly in other large Spanish cities, such as Madrid or Seville, without any regulation in force, but due to the effect of the pandemic.
But entities such as the Tenants Union have recalled once again that the evolution of prices in Catalonia does show a clear difference between municipalities with regulation. Since the law was approved, monthly payments have been reduced by 5.5% in those that have the ceiling and 3.3% in those that do not. If only the second quarter of 2021 is taken compared to 2020, the decrease is 3% in the first and an increase of 0.2% in the second.
In his evaluations, the director of the Catalan Housing Agency, Carles Sala, has tried to be prudent and has stated that they will still have to wait a few more quarters before drawing conclusions about the impact of the law, due to the “great distorting effect on the market that caused the pandemic ”. Regarding the significant volume of contracts signed in Barcelona, Sala has stated: “We will see if it is a trend that will continue, but the increase in supply in the last year has favored the increase in contracts and lower prices.” “While in the rest of Catalonia”, he added, “as the situation was no longer so stressed, it remains more stable, both in terms of prices and contracts.”
Beyond the impact of the law, the other great novelty has to do with the area of application of the regulation. It started with 61 municipalities for one year, but now all those who want to have regulation for the next five years must have requested it. In this way, practically all the large cities, with Barcelona at the head, have already processed it. In total, of the 61 localities declared a stressed area, 10 have not yet done so (although they are on time). In contrast, 22 municipalities that did not have a rental price limit have asked to be included in the list. Many of those who ask to keep the regulation are governed by the PSC, a party that voted against the law.