Buying a home has become an almost impossible mission in Spain. Inflation and high interest rates have caused getting into debt today is expensive. This translates into much higher mortgages than before, in addition to the constant increase in purchase prices in almost all large cities. So given the difficulties of acquiring a home, another idea gains ground.
Buy a room instead of an apartment.
The project. Last year, a startup called Room.com caught the attention of the Spanish real estate market. The company, which won the 29th SeedRocket Entrepreneur Campus, offered for the first time in our country a method of purchasing rooms with the aim of opening the doors to the public (mostly young) who could not afford to buy a complete apartment.
The reasoning. “A young man who until now paid 400 euros a month for a small room in Madrid, thanks to our platform, can now pay the same 400 euros/month for a room that is his, which he amortizes every month and which he can then sell to recover all your savings or rent and obtain a monthly income that helps you with your expenses,” the creators explained in this article from El Español.
How does it work? As they explainWhen you buy a room you are buying a percentage of the property. The operation is the same as when buying a complete home, but in this case you are acquiring a part: your room and a percentage of the common areas. The purchase and sale operation is formalized by public deed before a notary, being the owner in the Property Registry.
In this way, you achieve some benefits: you stop spending money on rent, you transform that expense into savings for the down payment of your complete home, you have a real asset that revalues over time and you can access the real estate market sooner.
What if I leave that city? The room is still yours. So, as the owner, you can sell your share of the property or put it for rent and receive that passive income every month. Right now, the startup is offering the first rooms and aims to become “the number one room operator in Spain.” Their plan is to put 50 rooms on the market in 2023 and expand them to 500 in 2024.
The context. As we have said in several articles, the loans that banks grant to families have become more expensive. And that translates into higher mortgage monthly payments. CaixaBank calculated last year that the percentage of income that a middle-class family allocates to a mortgage is around 38%. A scenario that is several points above the 30% of family income that financial experts set as a healthy limit.
The rental drama. And the lease is not released either. A idealist study points out that in cities like Barcelona the quota has shot up to 47.5%. After the Catalan capital are Bilbao, which reaches up to 38.3%, Madrid, which goes from 33.1% to 37.7%, and San Sebastián, where the effort grows from 31.5% to 35.4% . The rental market today is going through an upward period and is subject to the pressures of tourist housing and foreign purchases.
A room. Thus, the demand for single rooms has increased by up to 40% in cities such as Madrid and Barcelona due to the difficulty of young people in accessing an entire apartment. According to data from Pisos.com20% of the rental housing stock in Barcelona (not counting tourism) is already being dedicated to the room market.
But of course, that demand is causing prices to also rise. Sharing a flat is 10% more expensive than two years ago in Spain, where the average Price amounts to 383 euros, but it is much higher in large cities. Spothome points out that in Barcelona it is €603 per month, while in Madrid it is €558 and in Palma de Mallorca it reaches €516. Even in the suburbs it happens: in Móstoles or Leganés they are asking for €800 and €850.
Because? One of the reasons why many tenants are offering separate rooms is because this way is more profitable for them financially. They can go from charging €1,800 a month for a 110 m2 apartment in Eixample (Barcelona) to earning €2,800 if they rent the 4 rooms separately, according to some experts in this EFE article.
Image | José Antonio Gallego/Unsplash
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*An earlier version of this article was published in June 2023