Despite a growing interest in renting, the trajectory of rental prices has followed the one observed among house prices. Although rental prices began to drop before the collapse of the housing market collapsed in 2008, both house and rental prices lost approximately a fifth of their value before they started climbing by the mid-2010s. In 2020 the average price of rental houses was11.4 euros per square meter, which exceeded the market value prior to the crisis.
Rent prices show large differences across regions and are determined largely by economic activity, tourism, and population size. The Community of Madrid and Catalonia are the core of the residential market in terms of volume as well as demand and price dynamism. In 2020, the most expensive rental property was located in these regions: with prices of 15.3 and 14.63 euros per square meter respectively, these were significantly above the national average. And whereas prices surged all over the country between 2015 and 2020, prices grew by merely a fifth in Extremadura and Asturias. And at the other extreme, prices went over 55% in the Community of Madrid and Catalonia. . The markets in these areas and Andalusia represent over half the national total offer of rental dwellings.
The contrast is even more striking between cities and streets. In metropolises such as Zamora, Ciudad Real, and Caceres, the cost per square meter for rentals was less than six euros as of December 2020, less than half the price found in Barcelona, Donostia or Bilbao. The streets with the most expensive rental properties, Paseo de Gracia (Barcelona) and Calle Serrano (Madrid), list prices of over 30 euros per square meter. Both streets are commercial, touristic and business hubs that attracts national and tourist renters.
Investing in rental property
As rent prices surge, investment in rental residential property becomes more enticing. Over the course of the last decade, the rate of return of investment in rental housing grew constantly and reached 6.8 percent in 2020. Such circumstance have attracted the interest of large investors and boosted what is known as 'build to rent' in Spain, that is, property development designed specifically for renting. Nevertheless, other real estate assets still offer a much more appealing profitability, such as offices and stores.
In addition to offering long-term rentals, landlords may also opt to lease their property for tourism. This option has higher earning potential than long-term rentals, particularly in cities with touristic appeal. For example, in all ten districts located in Barcelona, tourist property rentals were more profitable than residential property rentals as of September 2020. Nevertheless, the increasingly popular choice of renting to tourists is deemed controversial because it is pushing up rental housing prices.