Single vs. Multifamily Housing (Living Sector)
The celebration of SimaEXPO in Madrid brought about several novelties across the Real Estate market, including the industry’s subtle claim for single-family homes, an alienated asset class in recent times. c.15,000 housing units were presented for sale at the event, and out of these, 24% were single-family homes (a substantially higher figure than pre-pandemic levels and +4% vs. FY 20). It looks as if the pandemic has given rise to people fleeing from urban cities in search for larger homes, but this is not entirely the case.
Living is the most influential sector for Real Estate in 2022, accounting for 26% of total investment in Spain with c.€1,135 million transacted in Q1 22 (+50% vs. Q1 21). Within the segment, multifamily residences composed of Build-to-Rent (BTR) projects continue representing the majority of investment (c.75%) which shows the existing opportunity for novel high-quality product, in line with the increasingly demanding needs of the public.
In Spain, 67% of the total population lives in apartments (multi-family), a figure that contrasts with the rest of European countries, where the average is 46%. This probably explains why in Madrid, the average amount of single-family homes up for sale is only 5%, with the rest pertaining to multi-family. Outside major cities, the number of single-family units is somewhat higher reaching c.18%, but multi-family still prevails.
Regarding returns, prime residential yields in Madrid and Barcelona remained at 3% and 3.25% respectively for Q1 22, similar to London and Stockholm. Net yields stabilised in almost all European cities, in contrast to the contraction seen in previous months.
Rental prices for single-family homes in the province of Madrid reached €9.6/sq.m./month (+8.6% vs Q1FY21) showing signs of a growing demand, with a much more limited supply than apartments. The average asking price for single-family homes in Madrid stands at €3,518 /sq.m. (€4,490 /sq.m. in the case of apartments), while the average ticket reaches €1.46 million (€473,200/apartments). Given all this, it is safe to say that single-families are experiencing a short-term surge in demand, however, figures are still not significant enough to change the course of the living sector. It is expected that by 2035, c.60% of the houses in Spain will be occupied by households ofonly 1-2 people and by as early as 2025, 27.3% of households will be living in rented accommodation, so multi-family apartments will once again drive investment in the living sector.