The Rental Crisis In Valencia

We offer a rental service among our many services and we get many clients wanting to rent a property in Valencia before buying their final Valencia Property. However, we are currently only taking on a limited number of new clients for the rental service as Valencia has a rental crisis at the moment in the same way that many other cities and countries do.

Whether it's pandemic driven, greed driven or for any other reason Valencia finds itself in a rental crisis and this is a problem for both the local population and for anyone looking to move to Valencia for medium or long term living. We cannot charge for a service when we cannot guarantee that we will get a positive result and because of this we limit the numbers we are taking on.

Today therefore, we are going to look at the current situation, the background and possible opportunities or solutions for this rental crisis.

The Current Situation For Renting in Valencia

We have been looking at an ever diminishing supply of rental properties since the end of the first lockdown in Valencia. Well, that's not actually true, the number of properties available for rent was already getting lower before the Pandemic due to Airbnb and properties that were previously available for long term rent being put into the short term rental sector. However, the pandemic exacerbated the situation when large families realised that being cooped up with their grown up children for 24 hours a day for months on end wasn't an ideal situation in a world where an airborne virus thrived.

Post-lockdown, families decided to liberate their children by either buying them their own place, thus the lowering of properties for sale on the market, or renting a place for their children to live on their own. The numbers of single occupancy apartments has risen greatly post pandemic. This started the trend and the continuing influence of Airbnb is also an important factor in the current situation despite the difficulty in getting a licence for short term rentals that the town council sensibly imposed in order to control the lack of rental availability.

There is also a problem with empty properties. This is largely coming from banks and investment funds that bought whole apartment blocks from Sareb, the bad bank, post the 2008 financial crisis and they leave them empty waiting for the optimal time to sell them on. Largely when they come up for sale they are sold to people to live in as the banks cooperate with the funds to provide mortgages to people who wish to buy them. Getting a mortgage to loan these places out is more difficult and as interest rates rise it will become even less common as the payments from tenants will not cover the owners' mortgage costs.

Let's look at the numbers though. Up until a few years ago you could easily find rental properties in Valencia for under 500 Euros. This makes sense as the average wage in Spain is somewhere between 1000-1500 Euros per month (The national figures suggest it is much higher but this is the median range for those people looking for rental properties, younger people in their first jobs. Higher salaried people generally buy property rather than rent in Spain). If we go onto the largest portal in Spain Idealista and put in the parameters for searching for rental properties in the city we get 1253 properties in theory (Theory because there are lots of repeated listings) If we take out all of those that are 1000 Euros or more then we are left with 369. So only 369 properties under 1000 Euros and remember lots of these are repeat listings. If we then look at properties at under 500 Euros how many results do you think we get?

Take a look.

When I wrote this on Saturday morning the answer was one property and that was a total outlier which should have been at a higher price if compared with all of the others. However, you might struggle to go to the toilet.

Let's take it up to 600 Euros shall we? Once we do this we go up to the huge number of 7 properties. Two fifth floors without a lift for 590 and 600 Euros, two studios of under 50m2 without lifts and two caves, one of which is 31m2 and the other so bad there are no photos and our 499 Euro place from before.

In the range of 600-700 Euros? And remember this would be half of the average wage for most young people in Valencia. Well, there are 37 properties. But let's just assume for a moment you need a lift and at least two bedrooms. Well, suddenly it's 9. And honestly, a couple of them are good. However none of them are central, most of them are in Benicalap.

Let's look for what typically gets asked for on a rental though. That's three bedrooms, two bathrooms, with a lift, a terrace and furnished up to 1000 Euros. We'll take out any other criteria. We get six potential places. And not one of them has a terrace worth writing home about, four are first floor interior cave type terraces and the other two on higher floors are very small.

Why Is This Happening?

Firstly, we have to say demand is huge whether that is from the local market or people from outside Valencia looking to move here due to study reasons, work reasons or its burgeoning international reputation. Obviously those who have already arrived have soaked up most of the available properties. Nevertheless, we must look at why there aren't more properties coming into the rental market. It seems logical that if a property is easy to rent out with a huge demand for rentals then investors should be taking advantage of that fact and be buying places to rent out. I have to say at this point that our clients know this and are buying to rent out. They are also taking our advice from our recent post about getting good tenants. However, we are not dealing with a huge amount of investment clients. Our clients are therefore able to cherry pick the best deals and are renting out straight away.

Spanish people though don't generally buy to rent out. There are various reasons for this but the main one is because they don't want to have to deal with tenants as they have all heard the story of the tenant that didn't pay the rent, wrecked the place and was impossible to get out, yes all of those things. That tenant doesn't generally exist but that doesn't stop people thinking that all tenants are like that.

Investment funds are often still holding empty properties and "waiting for the right moment" to release them onto the market and don't want a tenant in their properties in case they need to sell the property. There are very few whole buildings for sale so people and funds can't come in and buy these to release onto the rental market.

Opportunities For Buyers

Obviously this means there are opportunities in the market for buyers looking to buy properties to rent out. Let's take an example.If a buyer wanted to get at least a 6% return on their money then buying a property at 100,000 Euros would mean an investment of 115k, remember the costs on purchase. To get a 6% return on that would require a monthly rental of 575 Euros.

Do you remember how many properties were for rent for under 600 Euros? Opportunity knocks.

There are currently 585 properties for sale in Valencia at 100k or under. Again remember there are many repeat listings and places that need modernisation too, so fewer in reality. Now bear in mind that nothing is central. But that doesn't matter because remember there is nothing available even in the areas surrounding the centre for under 600 Euros. Every dot you can see on the following map is within 20-30 minutes of the centre walking.

There are another 288 properties in the band between 100-120k. To get a 6% return on 120k, total cost around 138k, you require a monthly rent of 690 Euros. Remember how many properties were for rent under 700 Euros?

And what can you afford to spend if you think the property will return 1000 Euros pcm? Well, you should be looking up to a maximum buying price of 175k and for that you have a choice of over 2000 properties. Choose wisely and you should easily be able to get a property that suits this investment profile and manages to give you the return you might require.

Solutions To The Crisis

Our clients are not the solution unfortunately but they can be part of the solution by investing in properties in the city and renting them out. The biggest partial solution is government action forcing large holders of property portfolios to rent out their apartments. This should include investment funds, banks and family offices that hold more than a certain number of properties. However, again this is not a full solution because they would be renting at market values which are currently too high for many people. The government has helped by allocating extra help to young people renting their first property for a certain time, However all this has done really has been to increase the prices asked as the owners know that younger people will be subsidised, in other words more money for richer owners.

More social housing with fair rents is another option but that will take a long time to action as large scale building projects will be needed which take time and a lot of money. Less greed from owners is an option but good luck with that one as the majority of owners want to maximise returns from their investment of course. Banks selling their huge stock of housing with low interest rate mortgages might help to encourage investors to take on buy to let properties but with interest rates rising currently that has suddenly become a lot less likely.

As you can see, the situation hasn't got any easy solutions as long as demand remains high and there are no indications that demand is dropping in the near future. You could say "what about the towns and villages around Valencia?" Well as we have pointed out in the past, there are no places where there are a lot of apartments for rent so there are opportunities in those towns and villages too and we will be looking at the best places to invest in those places in a future blog post.

What Are The Current Alternatives?

We are talking with our clients on our famous free consultation calls about their options for viewing properties in Valencia. Many of them want to rent a place for a few months, maybe 3-6 months, while they look for a property to buy. As you can see, that is actually really difficult. If there are few places available for long term rent there are even fewer for medium term rentals!

The Valencia Property Consultation Call

Therefore, we are advising various visits for our clients from Europe who can get here more easily to decide on an area on their first visit, then drill down into the actual properties in future visits. Happily for us, many come well prepared because they read this blog and actually already know where they want to be before getting here and we can start straight away to find their future property.

Obviously it is more difficult for our North American and Oceanic/Asian clients as coming over for a few days or a week a few times is more difficult. Luckily, we often have medium term rents available from our clients who may be away from Valencia for a time but we cannot guarantee this. We often suggest that if one place is available then it's probably best to take it because the selection of available places is unlikely to be great. It's better to compromise on a rental, which is by definition shorter term, rather than compromising on the place you purchase.

If you want to know what's possible for you then by all means continue to contact us about medium and long term rentals. We will let you know if we are likely to be able to help you but as stated above, we have suspended our normal rental service for the moment. We can help guide you but an initial Airbnb/ type rental or even a hotel stay might be your initial step on arriving in Valencia.

News From Spain

Inflation surprisingly dropped to 7.3% last month, well below the 8.9% figure previously. This good news is on the back of reductions in the costs of energy and commodity prices. Core inflation excluding food and energy is around 6.4% remaining stable there from last month. This will be a relief for the Spanish government meaning their measures are starting to have an effect.

More good news is that the upcoming train strike has been called off after progress was made in the talks between the management of RENFE and the Unions. At the same time with the uptick in Covid numbers it will remain mandatory on public transport to wear a facemask until March 2023.So make sure to carry your mask when travelling.

And in bad news, especially for my son, Spain has a backlog of over 300,000 people waiting to take their driving test. This is due to the pandemic of course but also a lack of instructors and examiners currrently.

Golden Visa Property of the Week

If you are going to buy on Valencia's Golden Apple (Manzana means both apple and block) then you may as well get a penthouse and make it exactly as you want it rather than paying for someone else's tastes. This penthouse is perfect for those wanting plenty of space, a large terrace and to be right in the centre of the city.

"About the igneous chariot of swift, flaming steeds
I crossed with him the shadows of the night, and we cross the deep realms
of unmeasured space, through suns and worlds.
"-What's this? -My palace”

Indeed, makes you think, doesn’t it? Wise words from the Poet Vicente Querol, whose name has since been given to the street that is the ‘Golden Mile’ of Valencia. In the centro historico, this area has been the home of the great and the good of Valencia for generations.

And if you fancy become part of this history, here is a 10th floor penthouse apartment for sale on this very street. It has 4 bedrooms and 2 bathrooms, gas central heating and a huge roof terrace (40m2), east-facing (the ideal orientation, missing the heat of the afternoon sun).

It does need modernising and redecorating, but when its done you really would be talking about a modern day palace penthouse, perfect to come home to after crossing the deep realms through suns and worlds (big night out in Russafa by the sounds of it)."

Apartment of the Week

Look, this one is straightforward. An apartment in a nice part of town, beside the tram line and 10 minutes from the centre. High up and facing south so loads of light. We're in La Zaidia area, the first place you hit when you walk north out of the city centre and cross the riverbed. This particular street is nice with lots of cafes and restaurants, but everything shuts down about 9 or 10 so nice and quiet in the evenings. The street is also lined with palm trees for that authentic 'Look at me I live by the Med' look.

It's a corner property, with a balcony to take advantage of that light. The property has been fully renovated. Bathrooms (both of them!), new double-glazed windows and a completely open living area, separate laundry area and 3 bedrooms.

As I said, this isn't complicated. Nice apartment in a part of town you will enjoy living in. Call us and we'll go have a look.

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