20% of all houses in Spain are in areas subject to future price limitations

Some 4.2 million houses, almost 20% of the country’s housing stock, are built in areas that could be considered as stressed areas once the State Law for the Right to Housing is approved in the Courts and starts rolling. The province with the most properties in these hot areas would indisputably be Malaga, with 68% of the houses. They would be followed by Valencia, the Balearic Islands and Alicante –with a proportion of around 45%– and Madrid and Santa Cruz de Tenerife –with another 30%–. In Barcelona, ​​Seville and Melilla the proportion would be close to 23%, according to estimates published yesterday by the real estate consultancy Atlas Real Estate Analytics.

The declaration of a stressed zone is one of the mechanisms that the autonomies will have to control rental prices once the housing law gets the green light in Congress, which is expected to happen in the coming weeks. Thus, when the area is declared as such, measures of various kinds such as the limitation or freezing of rents will come into effect.

However, for regional governments to be able to declare these areas as such, they must first comply with two requirements at onceaccording to the draft approved by the Council of Ministers a year ago.

On the one hand, the cost of housing plus basic supplies must exceed 30% of the average income in the area. On the other hand, the price of housing in the five years prior to the declaration must have experienced a percentage of accumulated growth at least five percentage points higher than the percentage of accumulated growth of the regional CPI.

Taking these two requirements into account, the real estate big data consultancy has set the number of homes located in these areas at 4.2 million, which represents a total of 465 postal codes of the 11,034 that exist throughout the country.

The map resulting from this analysis also shows the strong contrast housing prices and financial effort of households between the Spanish regions. While in the provinces with the hottest markets the number of postal codes affected is around 50, in others such as León, Cuenca, Zaragoza or Córdoba the number of postal codes in stressed market areas is non-existent.

Other scenarios

The current text of the bill that is being negotiated between the Government and the usual partners in Congress began to be drafted when inflation was anecdotal. Now, after more than a year with the CPI on the rise and at maximums for several decades, the possible declarations of the stressed areas are in danger due to their direct link with the rise in prices. For all these reasons, the coalition partners and their regular partners are negotiating with the aim of softening the required conditions.

One possibility, knowledgeable sources pointed out to this newspaper a few weeks ago, would be to lower the percentage of cumulative growth in the CPI needed to be able to declare an area under stress from five to two points. Another, that to carry out the declaration it is enough to comply with one of the two requirements currently contemplated.

The real estate consultancy has also put figures on these two scenarios that could be approved. In the first case, it would suffice for the average effort rate to pay for housing to exceed 30% of the area’s income. In this context, 1,606 postal codes would be subject to the regulation. That is, some 8.6 million homes, 40% of the houses in all of Spain. Under this scenario, for example, 94% of the homes in the Balearic Islands would be in these areas. In Malaga, the proportion would reach 86% and in Madrid and Barcelona it would exceed 67%. Only the autonomous city of Ceuta would be completely spared.

In the other scenario, just over 5 million homes would be located in hot areas, 23.6% of the total.

For all this, recalls Alejandro Bermúdez, co-founder and CEO of the consultancy, “the broadest criteria would lead to more than 40% of the areas being declared as stressed.” For this reason, when applying the legislation “it is vital to understand how it affects all the parties involved, this is both households and investors, in the case of rentals”. Declare an area as stressed “has implications for investor decisionsince the forecasts of price increases have great weight when analyzing profitability in financial models,” he points out.