Spain rental yield drops below 3%, with 400,000 fewer apartments

Renting an apartment in Spain yields less than inflation: the calculation explaining the flight of landlords

An apartment worth 100,000 euros should be rented for 500 euros a month just to break even with inflation. This thumb rule has settled into Spanish rental economic analysis, clashing directly with market reality: the average gross rental yield for housing in Spain stands at 3%, below the CPI. With these figures, increasingly fewer owners see sense in immobilizing capital in bricks.

The approach is simple. The landlord immobilizes capital—the market price of the apartment—and expects a minimum return. If official inflation hovers around 5%, any investment that does not exceed this threshold destroys purchasing power. To this must be added property tax, community fees, waste collection, and wear and tear, which raises the rational floor to those 500 euros monthly for every 100,000 euros of price. Below that figure, the business is unsustainable.

The Sánchez effect: 400,000 fewer rental apartments

Since Pedro Sánchez took office at La Moncloa, the long-term rental market has lost 400,000 apartments, a 44% reduction in supply. It is not that they have not been built: it is that many have left the traditional rental circuit. In Catalonia, the drop reaches 7% over the same period, according to sector data.

The repeated explanation is legal insecurity. The so-called "Maricarmen Decree"—the regulation that limits prices and strengthens tenant protection—has ultimately convinced many owners that the game is not worth it. The final blow, they call it. And the election calendar, with elections called less than two months after its approval, prevented the effects from being visible at the polls.

Why the purchase price changes everything

The purchase price of housing has risen by 50% over the same period. An apartment costing 200,000 euros and rented for 1,000 a month was marginally rational. The same apartment, now at 300,000, makes no sense at that price. The rise in purchase price inevitably translates to rent, but salaries do not keep up.

Some argue that the apartment price is not the tenant's problem. The counterargument is that all services are provided because they are profitable for the provider. If the landlord does not obtain a return, they stop offering the service. And that is exactly what is happening.

The financial alternative eating up real estate

With 10-year US Treasury bonds paying near 5.3% and 30-year bonds near 5.7%—AAA debt, maximum rating—Spanish real estate does not compete. Some analyses go further: with current regulation, rental yields should be considered junk bonds, equivalent to CCC, for which a 17% annual return is required.

The advantage of property, say defenders of investment, is appreciation. Rent pays expenses and little more; the gain comes upon sale. But that is speculation, precisely what is criticized. Without counting resale, the profitability of pure rental is ridiculous.

The State does not want to be a landlord

Neither autonomous communities nor municipalities have built enough public housing to compensate for the exit of private owners. The reason is simple: it costs money and turns the State into the villain. No public entity has assumed the role of affordable landlord on a large scale.

Meanwhile, the population grows due to immigration, and houses do not increase at the same rate. Regulations make construction unprofitable or impossible. The result is a housing stock that barely grows against soaring demand.

The 1990s experience: room for 300 euros

In the 1990s, finding a room in a Spanish capital took days. A second-hand one was resolved in 48 hours. The price: 25,000 pesetas a month, about 300 euros today. Modest but dignified apartments, with elevator and central heating, shared by young people and workers.

Today, an Ibis hotel in Madrid does not drop below 50 euros per night. A hotel room equates to between 1,500 and 4,000 euros a month. And no one considers it extremely expensive. The difference is that the hotel is not subject to the same regulation as residential rental.

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With these numbers, the conclusion is uncomfortable for the official narrative: renting in Spain is too cheap relative to the price of housing. So cheap that it is a bad business. And bad businesses, sooner or later, cease to exist.