Santiago rents rise 11.6% despite price caps

Santiago leads Galicia's rent surge: €704

Containment measures are failing. At least that is what the statistics from the Observatorio da Vivenda de Galicia (Galician Housing Observatory) suggest: Santiago de Compostela ended June with an average rent of €704.1 and a 11.6% rise in the first half of the year, the highest among Galician cities. The ban on tourist apartments and rent caps have been in force for months; however, the series since 2014 shows a cumulative 69.1% increase, from €416.4 to €704.1. Correlation is not causation, but the timing could not be worse for the interventionist narrative.

Beyond the €704 average

The official figure is only an approximation. In the listing market, the median hovers around €900, with a bimodal distribution: expensive flats for high earners and substandard housing for students. The queue of students at five in the morning outside real estate agencies has become a staple of every August. Many contracts are agreed verbally, off-portal, and do not enter the statistics; therefore, the official data tends to underestimate reality.

Small landlords calculate and refuse to rent

Here lies the core of the problem. With a flat worth €200,000 rented at €700 per month, gross income is €8,400 annually. Community fees, IBI (property tax), insurance against non-payment, and maintenance consume about €2,200; IRPF (income tax), another €300. Result: approximately €5,900 net, a 3% yield on purchase price. Any major repair or empty month puts the business into loss. Under this scenario, private owners prefer selling or leaving the property vacant rather than risking default. Supply is not just stagnant: it is disappearing.

Construction remains the big missing piece

While the debate focuses on caps and bans, the solution addressing the root cause is nowhere to be seen. In Santiago, new housing clashes with urban planning policies that prohibit converting commercial ground floors into residential units – one of the few such cases in Galicia – and fail to activate undeveloped urban land. There are examples of plots included in housing plans that are not even accepted for negotiation. The municipality has more than double the area of Barcelona, yet construction remains stalled. Some argue that building alone would not suffice if demand does not moderate, but that option has not even been put on the table.

Who bears the cost of symbolism?

The declaration of a "tensioned zone" – approved by the Xunta (Galician regional government) at the request of the local council – has remained symbolic while supply shrinks. Public investment does not fill the gap: of the €3.6 billion promised by the central government for housing this year, execution had reached only €66 million, according to figures cited by Vozpópuli. The combination of caps, symbols, and unfulfilled promises leaves the market with fewer properties available and suppressed demand. Unless construction ceases to be taboo, the most likely prediction is that rent bills in Santiago will continue to set records. With the same recipes, there is no reason to expect different results.