In Spain, becoming a homeowner is not simple task. Neither is being a tenant. After years getting more expensive almost uninterruptedly, rental prices have reached their highest level since at least 2006. And that, among other things, has led to a very significant percentage of Spanish households (higher than the rest of the European Union) are squeezing more than advisable their wallets to meet their landlords every month.
Now we know a fact: to what extent this perfect storm, a mixture of skyrocketing rents, loss of purchasing power and homes overloaded of expenses, is increasing defaults among tenants. The big question is… Is late payment the canary in the mine of the housing crisis facing the country? Although the situation today is different from that of 20 years ago, in the run-up to the real estate crisis of 2008 it was certainly a clear ‘red flag’.
One piece of information: 7,957 euros. Studies are just that: studies. With its biases and limitations. a few days ago Rental Observatorya platform powered by Rental Insurance and in which the King Juan Carlos University, threw one with an interesting approach: its authors analyzed the levels of late payments that the Spanish residential rental market endured over the past year and discovered that the level of non-payments has grown significantly.
As a summary, they leave out a figure: 7,957.6 euros.
And what does it mean? That is the average delinquency that, according to the calculations Rental Observatory, was recorded last year among urban rentals in Spain: 7,957 euros. The data is interesting for several reasons. The first is its amount, which is equivalent to seven months of income. The second is that it shows that the problem of non-payments is getting worse in Spain. Those almost 8,000 euros represent a 4.23% increase with respect to the previous year.
Curious yes, surprising no. The percentage is interesting, but probably surprises few in the sector. After all, it arrives in a context marked by the increase in price of rents after years of increases and the high overexertion rate that weighs down the pockets of Spanish tenants.
“The debt increases continuously year after year, in the same way as prices and the financial effort that landlords dedicate to paying the rent,” add the report. Its authors recall in fact that the average rental price stood at 1,117 euros last year in Spain and, on average, tenants dedicated 34% of their income to paying their landlords.
What’s more, the 4.23% increase in delinquencies between 2023 and 2024 shows a certain slowdown in the expansion of delinquencies; but the observatory doesn’t think that’s a good sign. If in 2024 defaults have grown at a slower rate than other years in Spain, it is due, their technicians clarifybecause fewer houses have simply been rented. “In any case, it represents a considerable amount of debt.”
Three facts to reflect on. Rental Insurance is dedicated to the management of leases, making it an involved party in the market; But there are other observatories that help to understand to what extent things have become complicated for tenants. The first is the drift of rents. Idealistic calculate that in Spain, at a general level, the m2 of rental housing costs 13.5 euros, 11.5% more than a year before and almost double the €7.2 that was charged in 2014.
This evolution has little to do with that recorded in salaries. The INE tables show that in 2022 the average income per inhabitant was at 14,082 euros facing the 9,098 of 2012. In general and taking into account the CPI drift, BBVA Research estimated Recently, since 2020, we Spaniards have suffered a loss of purchasing power of around 20%. In short: much more expensive housing and households with less economic muscle to pay for it.
The tenants, suffocated. The third key has a lot to do with the previous two and is the “overexertion rate.” A few months ago, CaixaBank Research calculated it taking into account the percentage of households that are forced to allocate more than 40% of their income to pay for their homes, both bills and rent to their landlords or mortgages, depending on whether they live on rent or own. It turned out that in the specific case of the tenants that indicator was 30.6%.
Why is it important? Because it is well above the EU average, where the rate of overexertion among tenants is of 20.3%, and of course that of homeowners who pay mortgages (4.4%). The data reflects that it is common for tenants to spend more money on their home than they should taking into account their income level. In general, the Bank of Spain advises That this economic effort does not exceed 35% of the salary. In 2020, an average Spaniard booked 41% of your gross salary to meet their landlords.
“A close relationship”. These data are not trivial. The observatory appreciate “a very close relationship between average late payment and the financial effort” that tenants make to pay their rents. “Generally, those areas where tenants dedicate most of their income to rent coincide with those with the highest level of debt,” they clarify. And for example, a fact: in the 10 provinces where tenants dedicate more than 35% of their earnings to rent, late payments far exceed or are close to 6,000 euros on average.
Question of how much… and where. The Rental Observatory study raises another interesting idea: late payment in the rental market is increasing in Spain, but not in all regions equally. The greater increases They have been recorded in the Valencian Community (7.21%) and the Balearic Islands (6.8%) and the Canary Islands (6.79%), while in Extremadura the increase was noticeably smaller, 1.76%.
The photo also changes considerably if we look at the amount of the average debt. In Catalonia it stands at 10,996 euros, in the Balearic Islands at 10,233 and in Madrid at 9,812, three figures significantly higher than the national average (7,957) and that far exceed the data for Extremadura, La Rioja or Castilla y León, where the same indicator It moved within a range of between 3,300 and 4,300 euros. By province, the amount of arrears in Barcelona stands out: 13,419.
And what does that mean? The authors of the report draw a clear reading. “In general, a pattern is repeated that persists over the years, and that is that some of the communities with the greatest debt are found in coastal areas of the Levant and the islands,” points out the observatory. “These are the regions with the greatest importance for tourism, where rental prices tend to be higher and the labor and salary structure is more unstable, which increases the probability of non-payment.”
If the focus is closed, it is found that the territories in which delinquency grew the most throughout 2024 were Santa Cruz de Tenerife (8.2%), Valencia (7.9%), Huelva (7.6%), Alicante (7.4%), Málaga (6.8%) and Seville (6.6%). “Provinces with great weight in tourism and the service sector”, add the dossier before remembering that labor “instability” is added to the pressure exerted by tourism.
looking back. It is not the first time that Rental Insurance warns of rent arrears nor are yours the only data that they point out he freak. However, beyond its impact on tenants and landlords, the evolution of defaults is interesting for another reason: in the run-up to the 2008 real estate crisis, the increase in delinquencies was one of the canaries in the mine.
The situation is different today from that of two decades ago and then the indicator of defaults that grew exponentially was another, that of mortgage debt. But the rental market and the home ownership market are not isolated, especially if we take into account that a very significant number of rental housing is in the hands of small owners who have inherited it or invested in it.
In September 2006, mortgage credit managed by banks and savings banks was close to 846.5 billion euroswith a year-on-year increase of 25.2%.
Images | Jorge Franganillo (Flickr), Álvaro Ibáñez (Flickr) and Losmininos (Flickr)