Finding a place to live nowadays is frustrating, to say the least. Housing prices have skyrocketed just about everywhere, and with the rise of Airbnb and other home rental sites, there are simply far fewer units on any market. Like most markets, Spain has experienced this two-headed trend of decreasing supply and increasing prices. In the first half of 2022, residential real estate prices have risen by 6.22% in Catalonia. In Spain overall, prices rose 8.5% in the first three months of 2022, which is the steepest increase since Q3 2007. Comparisons to 2007 in the real estate sector are bad omens; the Great Recession triggered years of economic turmoil in Spain due in large part to its real estate bubble popping.
Part of Spain’s trend stems from people attempting to buy and refinance homes in order to shield themselves from a historically volatile sector. Traditionally, Spanish borrowers have opted for variable-rate loans, but that trend has changed, especially in recent months. They did this because European interest rates have been quite low for the last decade, and they could choose among banks that were competing for extremely low rates. But as the European Central Bank has signalled that it will be increasing interest rates in the coming months to combat inflation and stave off stagflation, more borrowers are opting to take fixed-rate loans. Even though these fixed-rate loans are worse in the short run, they look to be much better in the long term. Many homebuyers are turning and renting their properties out online, but with cities making it harder for short-term rentals like Airbnb to prosper, other companies are swooping in that do not actually destroy housing supply. Enter Spotahome, a Madrid-based startup that serves as a platform for long-term rentals.
Optimism, not exploitation
Since its founding, the company has raised over 90 million EUR in funding, according to Crunchbase. Part of investor optimism is that Spotahome’s business model is set up to capitalise on many of the good features of competitors like Airbnb and Homeaway, but without the intense government scrutiny. Governments are becoming increasingly aggressive towards these sites because they focus on short-term rentals. That is, they encourage homeowners to rent their properties out to people who are vacationing for a weekend or two. Regulators dislike it because it hurts housing supply. Renters grow frustrated because it means there are far fewer units on the market available for rental, which drives up prices. Neighbours and neighbourhoods hate it because it destroys the character and conviviality of a building or area if there is a constant churn of vacationers that turn units into “party houses”. Basically, there are few beneficiaries and many victims of short-term rentals.
Spotahome’s target, in contrast, is long-term rentals. To encourage long-term rentals, the company acts as an agent for the homeowner. They tour the properties to act as quality checks. Unlike traditional agents that might post a couple of flattering photos, Spotahome sends someone to take a full HD video of the entire property. No longer does one really have to visit to get a sense of things like lighting, spacing, and all those intangibles that drastically affect one’s enjoyment of a home. As more governments, but national and local, are enacting increasingly stricter restrictions on short-term rentals, one can only hope that the non-destructive market players like Spotahome will be there to encourage sustainable innovation in the real estate sector.