Spiralling rents add to Barcelona’s housing struggle

Luis Jardí lived in Barcelona for 21 years but, despite having a good job, he could never afford to get on the housing ladder. When he arrived in the city, his rent was 20 per cent of his take-home salary; yet if he had renewed his rental contract recently, the payments would have swallowed up almost 40 per cent of his income.

“This would have made it difficult to live comfortably in Barcelona and the company I work for allowed me to telecommute after Covid so I decided to leave,” says Jardí, 55, an executive search consultant who has returned to his hometown, south of Tarragona. “I miss Barcelona a lot — all my friends are there and now I’m living in a small town with far less to do.”

Jardí is far from alone in struggling with high living costs in Spain’s second-largest city, a victim of its own success as one of Europe’s most visited tourist destinations. Per square metre, the average rent in Barcelona rose 25 per cent in 2022, according to Spanish property portal Idealista. In the first quarter of 2023, apartment prices hit a fresh peak of €1,087 a month, according to the latest data from Catalan public agency Incasòl.

The rises come after rent controls put in place in September 2020 by the regional government of Catalonia were declared unconstitutional by the Spanish courts in March 2022, since when landlords have been free to charge market rates for new contracts. There has also been a dramatic reduction in supply, with the number of rental homes advertised on Idealista falling by more than 40 per cent in four years, from 36,000 in the first quarter of 2019 to 20,000 in the same period this year.

Meanwhile, Barcelona’s growing status as a tech hub is also pushing up demand for rental homes from well-paid international workers — one out of every five people living in the city is foreign, according to census data.

“There is a very small supply of apartments at very high prices,” Jardí says. “People can’t rent in Barcelona and have to go to peripheral areas where it’s cheaper.”

It’s a similar story for locals hoping to buy. The city’s housing market was one of the first in Spain to recover from the global financial crisis, then the Catalan independence referendum in 2017 caused widespread disruption — viral images of clashes between protesters and the police made people think twice about buying or even holidaying in Barcelona.

Prices were increasing again before the Covid pandemic, when tourists and locals fled the city and some buyers were reportedly able to buy at big discounts. In June, the average price in Barcelona city was €4,131 per sq m, up 2.5 per cent in a year and almost back to where they were at the start of 2019, according to Idealista.

“Compared to London, property prices in Barcelona might seem reasonable but not compared to local salaries. Less than a fifth of my group of mostly university-educated friends in their late thirties and early forties have been able to buy homes,” says Duncan Rhodes, editor of the Barcelona Life travel guide, who pays €1,300 a month to rent an apartment in Eixample, a central district known for its grid-like layout and for its many Gaudí buildings, including La Sagrada Família.

In part, Barcelona’s high property costs are due to foreign investors and buyers swooping on the city — locals have long blamed Airbnb-style rentals for driving up rents — but they have also been compounded by a lack of supply. In late 2018, after bringing in policies to curb mass tourism, the erstwhile mayor Ada Colau, a leftwing former housing activist, introduced some strict property regulations. These stipulated that 30 per cent of new homes in developments above 600 sq m had to be allocated to social housing. In the years since, there has been a marked drop in home building.

In the first half of 2023, data from Catalonia’s College of Architects shows there were only 240 planning approvals in Barcelona city, an 80 per cent drop compared with the same period in 2018, before the quota was introduced. While Madrid has also experienced a fall in the number of approvals since the pandemic, the decline has not been as severe and many builders were deciding to leave Barcelona for the capital, according to El País newspaper.

There is a very small supply of apartments at very high prices. People can’t rent in Barcelona and have to go to peripheral areas where it’s cheaper

Colau was ousted after the municipal elections in May and her successor, Jaume Collboni, from the Socialist party, has said he will review the social housing quota in the autumn because it hasn’t delivered the promised results — he also said that Barcelona would be the first to implement Spain’s new legislation to cap rental increases. Mark Stücklin, founder of the website Spanish Property Insight, says he hopes a relaxation in the rules will stimulate investment and lead to a resurgence in building.

Until then, and as the domestic market is stymied by rising interest rates — the number of new home mortgages granted in Spain in May fell by 24 per cent compared with May 2022, according to the Instituto Nacional de Estadística, with Catalonia recording a 31 per cent decrease — cash-rich foreign buyers are once again seizing their chance.

The share of property sales in Barcelona to overseas purchasers hit a record 22 per cent of the market in the final quarter of 2022, the latest data set available, according to Barcelona City Hall. At the top of the market, in the small amount of new luxury developments, more than half of properties are being bought by foreigners, Stücklin says.

Earlier this year, the 650 sq m, 20th-floor duplex penthouse at Mandarin Oriental Residences, on Eixample’s Passeig de Gràcia, the city’s most luxurious shopping street, was bought by an Asian buyer for more than €40mn.

While British buyers have traditionally been the biggest group of foreign purchasers in Spain, numbers have decreased since Brexit, including in Barcelona, according to Mohammad Butt, the director of the city’s branch of Lucas Fox estate agency.

“The state of the UK economy and rising interest rates also mean people are thinking twice before they commit to a big purchase like a second home abroad,” he says.

Conversely, there has been an uptick in US buyers in Spain — research by the General Council of Notaries revealed an 88 per cent increase in American home purchases in the country during the first half of 2022, compared with the first half of 2019.

Many international buyers want to be in the thick of things in Eixample, which has the best restaurants and grandest buildings, according to Michelle Östlund, an acquisitions manager at the property co-ownership company August.

Other foreigners will look by the beach at the newly upscale former industrial area of Diagonal Mar or at Ciutat Vella, Barcelona’s oldest neighbourhoods that include the famous La Rambla boulevard, which is getting an ambitious makeover to “detouristify” it and create more pavement space for pedestrians.

Less than a fifth of my university-educated friends in their thirties and forties have been able to buy homes

Albert Milián, head of listings at Sotheby’s International Realty in Barcelona, says his average client spends about €1.5mn. “This would get them a completely renovated three-bedroom apartment of about 200 sq m in the centre,” he says.

However, there is still uncertainty about the direction Barcelona will take under its new mayor. Some locals also lament recent increases in street robberies, litter and traffic and point out that many companies have decamped to other parts of Spain since the independence referendum.

Yet the city still holds an irresistible draw for many. Last year, Londoners Lucie and Marc, who work for a software company, bought a two-bedroom holiday flat in a converted period building in Eixample.

“Barcelona offers that mix of city, culture and the beach which is so rare — usually you have to choose between one or the other,” says Lucie, 41, who did not want to give her surname.

When they’re in town, the couple work from home during the day and then enjoy Barcelona’s famous gastronomic scene by night.

“We love to eat alfresco and, even if we finish work at 9 or 10pm, there are still great restaurants bustling until midnight,” Lucie says.

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