2023-04-30 11:03:13
State intervention in the economy has been the subject of long debates in the history of economic doctrines, where there are different points of view, from the invisible hand of Adam Smith, where the economy moves thanks to private property and free decisions of individuals until the disappearance of private property with full state control of Karl Marx. Despite the increasing regulation of the economy, the right to private property and the enjoyment of its income has always been considered a red line in advanced democracies. But this line could be crossed with the approval of the new housing law that will bring about substantial changes in the dynamics of the rental market, but also on the purchase and sale of real estate, and it will do so by unbalancing market forces and modifying the conditions agreed in contracts currently in force.
From the investor’s point of view, the return-risk binomial must always be met whereby, the higher the risk in the investment, the higher the minimum return required to make the decision. In the case of rental housing, the average gross return is 7.5%, although it remains at 3.7% eliminating the effect of inflation, which is an adequate return if the risk is low and the alternatives Investment without risk, such as Treasury bonds, do not exceed it, something that is already beginning to fail while waiting for the ECB to increase rates to 4% this year.
If, in addition, the risk of renting a home increases due to the owner’s defenselessness in the face of non-payments and “squats”, which generates insomnia and anxiety about the situation and possible damage to the property, together with the increase in the costs of said home Due to inflation and the rise in the Euribor, we have a process of decoupling the aforementioned pairing unless rental income increases enough to assume said risk. But, far from doing so, the rental price is capped, which in the future will be associated with an unknown index and which could even mean having to lower the rent, generating a mixture of uncertainty, fear and a possible drop in profitability that will that more than one think long before investing in housing to rent or put the one you already have on the market.
We are a country of small landlords and, in general, we Spaniards are risk averse, for this reason, many wonder if renting will continue to be worth it and the answer is that everything will depend on the risk that each one is willing to assume, knowing that, With the new law, the profitability will be lower than the current one. With the passage of time it will be seen if the owners continue to rent their homes, if the CCAAs declare the areas under stress, if an underground economy is created or if defaults are rampant. From all this, it will be seen how the profitability for the owner and the ease of access to rent for the tenant evolve, something difficult to combine.
If, in addition, as has already happened in other countries, the supply of housing for rent falls significantly, far from benefiting those it is intended to protect, it will harm them. I wish this law had incorporated measures to eliminate most of the legal obstacles that slow down the process of massive liberalization of land for construction, which would help lower the price of housing by reducing the price of land, which represents 50% of the final cost. of that.
Juan Carlos Higueras is a PhD in Economics and professor at EAE Business School
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