Spanish Home Ownership Love Affair Set to Fade, Developer Says

(Bloomberg) -- Spain’s love affair with home ownership may fade even more as young workers’ ability to get on the housing ladder is further dented by the pandemic, according to one of the country’s largest property developers.

With young people increasingly unable to save enough to make down-payments on homes, a trend toward increased home rentals may accelerate, David Martinez, chief executive officer of Aedas Homes SA, said in an interview.

Aedas last week signed a deal with Lar Espana Real Estate Socimi SA and Groupe Primonial SAS to build 655 apartments for the Spanish rental market.

That’s part of the firm’s bet that a generational change is underway in housing that will see Spain slowly pivoting closer to the situation in Germany where only about half of people own their own homes. At 76%, Spain has the highest ratio of home-ownership in Western Europe after Malta.

“No one can question that there’s a generation of young Spaniards who don’t have access to housing,” Martinez said. “The pandemic has accelerated that shift toward a German model.”

Property Ladder

It’s the second such deal Aedas has signed after reaching an agreement in 2019 to build 500 homes for rent for ARES Management Corporation. Martinez said Aedas expects to announce similar agreements by the end of the first quarter.

Rental prices fell 7.3% in Madrid last year, the first decline for the city since 2014, and 9.4% in Barcelona, according to Idealista, a property website.

Aedas’s competitors are also entering the rental sector. Neinor Homes SA in September bought a 75% stake in Renta Garantizada, a rental management platform with 2,500 units under management.

Aedas has been taking advantage of the pandemic to rebuild its land bank, Martinez said. The company has bought land for developing 1,500 units since last June, swelling its stock of land to accommodate the building of 16,000 units.

Banks have also begun to tighten credit for developers, he said. The cost of credit has risen a maximum of 50 basis points to a range of 270-300 basis points during 2020. Lenders are also now insisting on 50% of homes in a project are sold before construction commences compared with 30% before the pandemic, he said.