‘Flexible living’ attracts investors in the midst of the housing crisis

Home sales are falling as interest rates rise, and traditional rental prices continue to rise while supplies dwindle. In the midst of this scenario, Spain leads Europe in growth of what is known in the real estate sector as flexible lifestyle. This is a modality lasting less than one year and is not regulated Urban Rental Law (LAU), since it is found on tertiary soils according to the lodging formula.

Madrid in particular is “pulling the wagon,” explains Juan Manuel Pardo, director of residential at JLL. It accumulates most of the current supply, with 6,631 beds in stock (58.5% of the total in Spain) and about 16,000 are under development, according to a report from a real estate consultancy presented this Wednesday in Madrid. They follow him at a great distance Barcelona (2200 beds) and Valencia (1100 apartments have already been commissioned and another 882 will be built). Other cities such as Malaga, Alicante or San Sebastian “are already attracting direct investment.”

The sector’s growth is sparking the interest of investors who have in recent years decided to diversify their portfolios by adding this type of asset to their portfolios, amid growing demand in communities where access to housing has become increasingly difficult. Lease agreements are becoming increasingly strict. Since 2019, the sector has accumulated 560 million euros of investments, of which 25% in 2023.

“The housing problem is causing many people to use these spaces for average periods of time,” adds Pardo. Especially workers with a permanent income. What makes this method different from other traditional sectors such as home rentals or hotels is the possibility of supply within the same property. short, medium and long stays. Most of the projects are new developments located in urban settings such as Madrid, Barcelona, ​​Valencia, Malaga, Seville, Alicante, Palma, Zaragoza or Bilbao, with large common areas and more than 150 beds.

For Prices Compared to Traditional Rentals: “The idea is that it costs the same or a little more, but with all the amenities included,” Pardo says. For example, when supplies such as water, electricity or energy are included in the monthly payment. “There may be an imbalance in short-term stays, but overall it changes in very similar amounts and sometimes turns out to be better,” he adds.

Madrid beat Barcelona

In Madrid, most of the current offer is located on the M-30 highway and is aimed at short-term stays. Operators like City Campus, Dovevivo or Smart rental. Future developments are planned on tertiary land outside the center and will be larger. Among them Be home, Do not give or Flexible life.

In turn, the JLL report reflects the significant presence in Barcelona of operators such as Cotown, Katerina, habit or Ukyo, which mainly operate apartments in the city center. Regarding future supply, there are already projects in L’Hospitalet de Llobregat or around Barcelona.

Given current demographic trends over the next 15 years, Spain’s population will exceed 51 million in 2037. At the same time, the largest population growth will occur in the main provinces, where the majority of the population will live. from 25 to 59 years old. In the next three decades, this figure will reach 45% of the total population.

Sales are falling and rental prices are rising

There are currently key factors that make access to housing difficult. For example, he savings required to pay the entry fee mortgages. On average, it takes 11.5 years to save up enough to pay off. But in large cities such as San Sebastian the figure is well above average (21.2 years), followed by Palma and Malaga with 20.9 and 16.8 years respectively.

According to the latest data from National Institute of Statistics (INE), the number of home sales in the first quarter of 2024 decreased by 5.6% at an interannual pace. And given the challenges of home ownership, there is a growing demand for rental housing, which faces a shortage of properties available for rent in the city’s most sought-after areas.

This creates a gap between supply and demand, which, among other factors, is causing rental prices to rise steadily in Spain’s main cities. Over the past year, this figure was 13.2%. But there are cities such as Valencia, which registered an increase of 19.9% ​​over the past year, followed by Madrid (+18.7%), Malaga (+15.4%) and Barcelona (+13.8%).

More one-person households

Demand flexible lifestyle also due to growth of one-person households. In fact, the ones that will grow the most over the next 15 years will be the smallest ones, consisting of one or two people. In 2037, there will be 6.5 million single-person households, accounting for 29.8% of the total. And the number of single people will increase from 10.7% of the total population in 2022 to 12.5% ​​in 2037.

But what types of homes are available to these people on the market? According to the JLL report, Spain’s current housing stock is characterized by being one of the oldest in Europe, with houses with an average age of around 45 years, but there is also a paucity of smaller houses, which are in greatest demand among residents. . single-person households.

“Among the 25 to 59-year-old segment of the population, there is a high percentage who seek to live alone but in a community. They are looking for flexible housing that can offer solutions adapted to the constant changes taking place in the modern world. lifestyle,” the JLL report abounds.

Impact of student residences

Despite everything, Spain is still an underdeveloped market compared to European neighbors such as France, the Netherlands or the UK. Main cities by number of beds Flexible life in Europe these are London, Madrid, Amsterdam, Paris and Manchester. The French country has the largest number of operational units Flexible life existing in Europe. Of course, in Spain, company consolidation has whetted investor appetite. student dormitories.

“Flex Living, operating less cyclically (no academic year specified), albeit with higher turnover, is already demonstrating its ability to generate stable cash flows. This confidence will lead to consolidation players and when viewed as asset class“different from others,” the consulting firm’s report concludes. flexible lifestyle can cover the needs of a minimal part of the market. The gap between supply and demand will reach almost 600,000 homes in a few years.