All housing crises in one neighborhood

Some of the real estate earthquakes that the country has suffered and that the country has suffered since the 2008 crisis are concentrated in a single building. The building in question is located on Calle de San Juan de Letrán, at number 4, in the heart of Malaga, a step away from the house where Pablo Picasso was born in 1881. The building has about twenty flats spread over six floors, a couple of commercial premises and overlooks a narrow alley (San Juan de Letrán) on one side, and a slightly wider street on the other (Gómez Pallete street). ). There are thirteen apartments owned, two rented and 5 tourist apartments. And a strange mix of older people who don’t know their neighborhood anymore, mature owners who doubt whether it’s time to leave, few young people in rented houses and many tourists with small suitcases on wheels.

Héctor Gómez, 58, the owner of 6ºC, has been in the building for 30 years and has lived in the neighborhood all his life. He starts to think and calculates that everything started to change 10 years ago. Or before, maybe. It’s hard to pin it down. What he does remember is that, in good times, he would go down to the nearby Plaza de la Merced so that his children could play with the children of the neighbors. Now there are almost no children playing in the square. Not almost neighbors. There are only terraces of bars and fast food restaurants (mainly paellas) occupied at all hours by tourists who eat and dine (predominantly paella). There are no children in our flagship building either. Hector’s children have grown up, have become independent and live in other areas of the city, cheaper and quieter. The same thing happened with the children of the others. And the young couples who arrived in San Juan de Letrán 4 also ended up migrating to other less expensive or quieter areas. They all responded to the general real estate shocks that shake the convulsed Spanish real estate world, particularly agitated now in Malaga.

In 2007 the bubble finished inflating. In 2008 it exploded, taking the market with it. During the following years, the real estate universe remained knocked out, asleep. But in 2022 sales throughout Spain have experienced an unprecedented boom since the start of the financial crisis. The most widespread thesis among experts suggests that the pandemic generated extra demand due to the increased savings of many families. To this was added the good financing conditions during part of the year (or even the rush to buy when it began to be seen that these conditions tended to worsen). Thus, in 2022 more second-hand houses were sold than ever. And the 650,000 homes, between new and used, that changed hands constitute a figure only exceeded in the hectic 2007. There are, yes, signs of exhaustion. The economist Gonzalo Bernardos, director of the real estate master’s degree at the University of Barcelona, ​​stresses the necessary effect —sought by the European Central Bank— that the rise in official interest rates will have. “For a family with an average salary that borrows 35% of their income, the difference between paying interest at 1.5% or doing it at 4.5% means about 94,000 euros less to buy a home,” he calculates. .

As everything is chained, the difficulties in accessing home ownership are bad news for those who rent or want to rent because an already overheated price becomes more expensive. Spanish tenants are, according to Eurostat data, among the most financially suffocated in Europe: 41% of households dedicate more than 40% of their net income to paying rent. The problem is basically an imbalance of supply and demand (there are few flats for all the people who need them, which in turn makes prices even more expensive, in a terrifying loop). “Rent is a very serious social problem, especially for young people,” says the director of the economic situation of Funcas, Raymond Torres. Last year, according to the supply data from real estate portals, amounts grew in Spain by around 7.5%. But that average is below the increases in the main cities.

In the 6th D of the San Juan de Letrán building, next to Héctor’s apartment, Valentina Aragonés lives for rent. She is Argentine, she arrived in Spain months ago, she is 25 years old and works as a waitress. She earns 1,400 euros a month and pays rent 900. She manages to live there because she shares expenses with her brother and she likes living there because she walks to work. She has no children. She can’t imagine living there with a family. In the 4th D there is another rented apartment. Before, according to Héctor, there were more, but they have also been replaced by tourist apartments. Francisco Toré, owner of a nearby real estate agency, warns that since the pandemic the price of housing —and especially that of rent— has become much more expensive in Malaga. That there is excess demand; the offer is missing. That an apartment for rent in the center is rented on the same day. According to Fotocasa, Malaga experienced the highest rental price increase in the entire country in 2022: 31%. Purchase values ​​rose 7% in official government statistics.

Experts warn that the limit is being reached. The level that monthly rents have reached and its comparison with Spanish salaries make it difficult to think that tenants can pay much more. But Carlos Martín, director of the Economic Cabinet of CC OO, recalls that “when the process of extracting income ends between people from the same country, the possibility of tourist apartments begins.”

Encarnación González, from 3rd D, is not an economist (actually, she worked in a psychiatric institution until she retired), but she knows this thing about tourist apartments. She has been in her apartment for more than 20 years, living alone. She has also seen the building transform until she has become unrecognizable to her. Next door, 3ºA was rented to a couple of architects with a small son. Later it was bought by a Swiss (nearly 14% of sales in Spain correspond to foreigners, according to the latest statistics from the registrars). The new neighbor uses it halfway, literally: half the time he lives in Switzerland and half in Malaga. When he does not reside, he rents it out by the day to tourists. Malaga, according to the latest INE statistics, has 5,972 holiday homes, one for every 97 inhabitants, compared to 203 inhabitants per tourist apartment in Barcelona or 251 in Madrid.

Encarnación (Encarni for the neighbors) complains about the parties at dawn, the noise, that she can’t communicate with them because she doesn’t know English: “Maybe they’re saying a bad word to you and you don’t know it. Be careful that one now, at 73 years old, has to take care of customs. All day up and down with the suitcases, boom boom, as if they were horses! She hates the noise of the street, full of bars, with a nightclub that she never closes. “One night I sat up in bed crying because I couldn’t sleep and I didn’t know what else to do.” She has sometimes thought about selling her house —they would give her more than 250,000 euros— and moving to a different neighborhood, but she is assailed by enormous laziness when thinking about organizing a move at her age. For this reason, she has resigned herself to seeing a different neighbor every day to whom she cannot even say hello because she does not understand him.

Tourists are also housed in 2ºA. The three-bedroom apartment belongs to Andrea Vinci, 61, an Argentine descendant of Spanish who in 2016 decided to come and live in Malaga with her husband. In 2018, tired of the noise that she was already beginning to make itself felt on the street, she decided to move to Rincón de la Victoria with her husband and rent her apartment. She does it for days, first, for safety: “This way I know that they are going to leave soon, without surprises: with students or with young people there may be more risk. They lose their job and bye, they leave suddenly and I could have problems”. Also for profitability: she charges 25 euros per night per room in low season, 40 in high season and 150 in the fair. Her floor is her job and her salary. The influx of tourists is so great in the neighborhood and there is so much noise at night that Andrea has come to the paradoxical decision of giving her tenants, along with the keys to the apartment, some earplugs.

Some analyzes have affected a characteristic of the current rental market in Spain. It acts as a way of transferring income from humble families to wealthy families. It is an approach that CC OO once addressed in a study based on microdata from the Survey of life conditions. The households that live rented are located mainly in the lowest income brackets while those who have a spare home (or more) to rent are part of the highest income. Carlos Martín insists on that idea. Part of the boom in sales that took place last year responds, in his opinion, “to a speculative movement” and not to the search for a house to live in. “Investors see that the profitability they are going to obtain through rentals is going to compensate them for that more expensive purchase,” he argues.

The 2008 bubble burst resulted in a price decline that lasted for years. At that time, housing was not considered a political issue of the highest order. In fact, in 2017, the General State Budget allocated 474 million to housing policies, the lowest figure in history. But lurking problems emerged. And, relay in Moncloa by means of, the parliamentary left has proposed to carry out the first state law of Housing of democracy. The negotiation has been anything but easy and is not over yet. The project foresees measures to expand the public park (it will prohibit the disqualification of VPO) or reinforce the guarantees of the buyers. But the rents, and the way to limit rents, have been the star topic of the discussion. Martín, whose CC OO union has supported the regulation, believes that it will have a “limited role in price control” by reserving the strictest measures, the maximum rental prices assessed by law, only for large owners. For private landlords, the draft, still subject to change, prioritizes tax benefits. The sector, however, clings to the argument that it could cause new imbalances in supply and demand. And Exceltur, the lobby of the big tourist companies, he fears that he will end up encouraging tourist apartments as an escape route from price controls.

If the regulation goes ahead and is applied, it will be time that will determine if it is useful or not. But any law will have to continue to coexist with a real estate sector that is cyclical and does not seem to be going through its rosiest moment right now. In nine months, official interest rates have risen 3.5 points. That leaves many families with variable mortgages trembling, and many others who wanted to buy a house will be left with their expectations frustrated. If more people have to rent, tenants will once again pay the price with fewer and, predictably, more expensive flats available. In short, the Spanish housing model seems to leave more and more people dissatisfied with the house in which they have to live.

Mónica Reino, owner of 2ºC, a fighter against the noise of the city center, sometimes also thinks about giving up, selling and leaving. Héctor, from 6ºC, says that his brother has had to move from Madrid to Toledo because of the prices. Encarni, from 3ºC, misses when he heard a little boy cry at night in his neighbor’s apartment.

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