The rental price in the majority of neighborhoods in the south of Madrid, historically the most affordable in the entire city, has risen above double digits in recent years, to the point where only one of the 21 districts that make up the capital and of the nine that form the entire southern belt have a average rental price less than a thousand eurosaccording to data collected by this means on the Fragua by Atlas Real Estate Analytics real estate data platform.
The district that maintains average rental prices below one thousand euros is Villa of Vallecas, where they are located in 926 euros. Furthermore, it is the place where prices have risen less during the last three years, only 13.6%. Despite the average prices, the offer is limited: currently, on the Idealiusta real estate portal there are only 47 apartments in this area for less than 1,000 euros. Just on the contrary, in its neighboring district, Puente de Vallecas, prices have skyrocketed by 44.3% since September 2020, reaching an average of 1,038 euros per month. The number of homes for less than a thousand euros available at this time stands at 80 units.
In the rest of the southern districts, significant increases have also been recorded: in Vicálvaro and Villaverdeprices they have risen 38% in the same period, up to 1,187 and 1,038 euros, respectively; while in Moratalaz the rent has increased by 29%, up to 1,156 euros. The lowest increases, although substantial, have been recorded in Latina, 28%, San Blas Canillejas, 27%, Carabanchel, 27%, and Usera, 25%.
Prices will continue to rise
Alejandro Bermúdez, CEO of Atlas Real Estate, believes that the south of Madrid, and the peripheral areas in general, still have room for growth in prices: “Given the current context of difficult financing for home purchases and high demand for housing for rent, everything indicates thatAffordable housing, and also the most profitable, will maintain or, perhaps, increase its demand and, therefore, its prices. These areas have had constant and solid price growth in recent years. This trend will continue to rise, unless the global real estate context is so negative that it also drags down these areas. “This is a very unlikely scenario, so we expect to continue seeing gentle price increases in the coming months and years.”
In an adverse context for the real estate sector, the manager of the consulting firm specialized in data considers The most central neighborhoods would suffer more falls than the southern neighborhoodswhich “will have a softer behavior and with more “inertia” and therefore we hope that in a “disastrous” global context they will behave better. In addition, due to their low prices they continue to be interesting neighborhoods for investors who put them up for rent because the return is higher than in others where the sale price is higher, but the rental price is proportionally not.
High effort ratios in the south of Madrid
The effort that households have to make in the southern neighborhoods of the capital is higher than the 35% recommended by market regulators. This means that, in a theoretical scenario, a family should not spend more than a third of its income on paying the expenses associated with housing, rent or mortgage payments and their expenses. The district where this effort ratio is highest is in Usera and Vallecas Bridgewhere The average rent represents 47% of the average income in the area.
With average efforts in the southern districts of the capital above 40% are also San Blas Canillejas (41%), Vicálvaro (40%) and Carabanchel (40%). Villaverde and Moratalaz are also above 35%, both at 66%; while Latina (32%) and Ciudad Lineal (33%) are in healthy ratios, according to Fragua by Atlas Real Estate.
In the medium and long term, in areas such as the Southeast Developments, between Vicálvaro and Villa de Vallecas, more than 100,000 homes will be launched, which will serve to expand the current supply. “The urban developments are divided into phases and our calculations indicate that they will be providing Madrid with new apartments until 2045-2050, so it will be a very measured entry into the market. 70,000 new people arrive in Madrid every year, so which is housing that is needed. Our feeling is that it will help keep the prices of a new construction “affordable” but it will not greatly impact the general price of new construction in other areas, although it will impact the averages, because these areas will have a tremendous weight in the municipality’s average. However, We do not believe that it will generate an oversupply effect“, concludes Alejandro Bermúdez.
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