Did you know that renting a property in Catalonia has increased by 12.5% when comparing November 2024 with the same month in 2023? The price per square metre in November 2024 has reached €17.8. What will happen to rental price increases in 2025? How will it impact the market, tenants, and landlords? In this article, we analyse all the relevant aspects.
In the Community of Madrid, the situation is no different, with an increase of 15.5% recorded from November 2023 to November 2024.
The consequences of rising rental prices
In recent years, especially since 2021, rental prices have consistently risen due to, among other factors, increased demand and reduced supply.
The rise in prices has led to several consequences:
- – Reduced household savings.
- – Undesired changes of residence.
- – Low emancipation rate among young people.
- – Difficulty accessing decent housing.
What will happen with rental price increases in 2025?
In 2025, rental prices are expected to continue rising due to the persistent gap between supply and demand. The lack of supply is caused by various factors that will continue to affect the residential rental market:
- – Landlords’ concerns about rent arrears.
- – The profitability of tourist rentals, which is often higher than that of long-term rentals.
- – The perceived lack of legal protection landlords feel regarding the illegal occupation of properties.
How will rents be revised in 2025?
To answer this question, several key points must be considered.
- – The first is the regulation of the Urban Leases Act, which in Article 18 outlines the process for rent updates, stating that:
- 1. The rent is updated annually, if requested by either party, according to the agreed method.
- 2. If no method has been agreed, the Competitiveness Guarantee Index is applied.
- 3. The increase is capped by the Consumer Price Index (CPI).
- – The second is the limit imposed by the Housing Law on rent increases, which was capped at 3% in 2024.
- – The third is the eleventh additional provision added to the Urban Leases Act by the Housing Law, which states:
The National Statistics Institute will define, before 31 December 2024, a reference index for the annual updating of residential lease agreements. This index will set a cap on increases under Article 18 of this law, aiming to prevent disproportionate rent hikes.
Therefore, during this month of December, it is expected that the INE will publish the index to be applied for rental updates in 2025. This percentage will be lower than the recent CPI figures.
How much could rents rise in 2025?
There is limited data so far, but it is anticipated that the CPI will be above 2% in early 2025, so the new index should be set below this percentage.
The limitation on rent increases also impacts the housing supply, as many landlords feel they are not receiving the income they deserve. However, it is important to consider the costs of maintaining an empty property:
- – Maintenance.
- – Mortgage payments, if applicable.
- – Property Tax (IBI).
- – Utilities.
- – Home insurance.
- – Ordinary and extraordinary community expenses.
On the other hand, landlords should also consider the convenience of a long-term rental compared to a short-term one, where tenants frequently change.
Strategies for negotiating rental agreements in 2025
As rental prices are expected to keep rising in 2025, several factors can be considered during negotiations:
- – Understand the local market. Whether you are a landlord or a tenant, analyse the rental prices in the area where you want to live or have a property to rent. Consult local property experts and online platforms to compare similar listings.
- – Opt for long-term contracts. Long-term agreements are often more attractive for both tenants and landlords, offering stability and reducing management costs.
- – Maintain clear and cordial communication. Trust between landlords and tenants is essential, and clear communication can help foster flexibility on both sides.
What are the potential consequences of rising rents in 2025?
Since the pandemic lockdown, rental preferences have shifted. Now, with rising prices, people are also changing their preferences and exploring alternatives:
- – Moving to rural areas. Many families and young professionals are opting for homes on the outskirts of cities or in rural areas where rents are more affordable. These changes are partly due to the possibility of remote working.
- – Increased interest in shared housing. To cope with high prices, more people are choosing shared housing solutions. This allows them to split monthly expenses and access centrally located properties with better connections.
How can tenants and landlords adapt to the current situation?
Proactivity will be key for both landlords and tenants to face market challenges. Here are some recommended actions:
- – Prepare documentation in advance
- 1. Tenants should have all necessary documents ready (employment contract, payslips, tax return).
- 2. Landlords should prepare the draft contract, request a property title search, and gather utility information.
- – Set priorities.
- 1. Tenants must prioritise what matters most: location, size, connectivity, etc., and know which aspects are secondary.
- 2. Landlords need to determine the desired rent, required guarantees, preferred tenant profile, and the costs of leaving the property vacant.
- – Research available grants and tax incentives
- 1. In some regions, subsidies exist to facilitate access to rental housing.
- 2. Landlords may access tax incentives (reductions in Property Tax or Income Tax).
In summary, 2025 will present significant challenges for the residential rental market and the right to access decent housing.
If you need help finding a property or renting out your home, contact the experts at Proddigia to analyse your case and help you find the best solution.
