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Cash Doesn't Cut It - Eight Reasons Why Lump Sum Relocation Policies Aren't Fit for Purpose
July 19, 2024
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A warm welcome to the June issue of PerchPeek’s Spain Market Monthly update!
Here’s where you’ll find the hottest updates around employee relocation and international talent strategy, insights from our experts on housing and cost-of-living news affecting your staff, the latest trends in global mobility, and tips and tricks on ways to support your teams.
A fly-by summary
● New Housing Law passed, including a cap of 3% on annual price increases, and passing agency fees on to landlords - how this may affect employees that are currently renting
● 35% of companies have difficulties finding workers, despite high unemployment in Spain, and the government is taking measures to boost recruitment from abroad
● Rental market update - Barcelona has lost over half its rental property stock since 2019, and rental authority predicts ‘disastrous’ effect on supply; plus, current rental prices
● New half-price Interrail fares for young residents in Spain this summer, plus 90% off local buses and 50% off high-speed trains - tips for helping relocating employees explore
Attention all HR and Global Mobility professionals supporting relocating employees: there’s been a massive shake-up in the Spanish rental market that you’ll want to know about!
The government has just passed a new Housing Law (la Ley de Vivienda) that will radically impact the rental market. Here’s a summary of the key changes:
● Rental price increases to be capped at 3% in 2024 - Up until now, rents could be increased annually in line with inflation (with an exceptional 2% limit in 2022 and 2023)
● ‘Tense housing market’ price limits - Rental prices will be further limited in designated ‘tense’ areas e.g. where average rents are over 30% of average household income
● Tenants no longer have to pay agency fees - Landlords will now need to pay the real estate agency fees and expenses, as opposed to tenants
● New measures around evictions - Evictions not stating a predetermined date and time will be prohibited, and landlords and tenants will need to use an arbitration system
PerchPeek insights
The new Housing Law seems like positive news for renters, as it offers them more protection and stability. It’s especially noteworthy that renters will no longer pay estate agency fees when signing a rental contract, as these can be pretty hefty - it usually equates to one months’ rent!
However, this could prompt landlords to sell up rather than putting up with additional fees and restrictions. If so, the reduction in property supply will put more pressure on the rental market.
To support relocating employees in light of the new Housing Law:
● Offer support when reviewing rental agreements and flag any clauses that look unusual
● Make them aware of their rights as tenants and outline the important changes, such as tenants no longer being liable for agency fees, and the cap on rental price increases
● Manage expectations on the competitiveness of some rental markets and expected timelines, and offer guidance on standing out from the crowd at viewings
Read on as we dig into other viewpoints on the changes being rolled out, plus a spotlight on current rental prices in Spain!
Despite the fact that there are currently around three million unemployed people in Spain, one third of Spanish businesses say they have difficulties finding workers to fill open roles. This figure increases to 50% when focusing on certain sectors like tech, hospitality and construction.
Why can’t Spain’s unemployed population fill the open roles?
While it would appear logical to give Spain’s unemployed population jobs in industries that are struggling to find workers, there are a number of reasons why it’s often not feasible:
● Many of the 1.2 million ‘long-term unemployed’ people (i.e. those out of work for over a year) are over 50 years old, meaning technical retraining is often unlikely
● 560,000 unemployed people in Spain have no secondary education, again making technical retraining very difficult or impossible
● Geographical disparities - the areas in Spain with the most jobs available don’t necessarily coincide with those with the highest unemployment rates
Plans to bolster recruitment from abroad
In summer 2022, the Spanish government eased the route for companies to hire directly from abroad for positions that are currently difficult to fill. They now plan to boost foreign recruitment further, by simplifying the process for immigrants to train for roles in industries with labour shortages, and to regularise their immigration statuses where needed.
PerchPeek insights
When it comes to talent, it’s clear that some industries such as tech and construction are faced with a larger challenge in sourcing talent from the local talent pool. While there’s a desire to hire locally and cut unemployment, there’s simply a lack of highly skilled qualified candidates.
Therefore, in order to remain competitive in their industry and meet business goals, companies will need to look abroad as this is the fastest way to acquire the skilled talent they need.
Minimum rental costs - Q2 2023 (source: PerchPeek):
For rental cost data for other Spanish regions, give PerchPeek a shout here!
In the news
● Barcelona has lost 51% of its rental stock since 2019
Over the past four years, Barcelona has seen over half of its rental stock disappear. Added to the growing demand from prospective tenants, this has pushed up average prices by +18.7% YoY. In comparison, Madrid has lost 44% of its stock over this period.
● Industry experts predict ‘drastic’ reduction in rental property supply
The Spanish Rental Negotiating Agency (ANA) takes the view that the Housing Law is going to be ‘disastrous’ for all parties and will negatively impact property supply, as well as having other ‘undesirable effects’ such discouraging new investment in property.
● Over half of Spaniards believe the Housing Law will reduce rental property supply
A new report from the Mutua Proprietarios Group reveals that 51% of respondents believe that many rental properties could be withdrawn as a result of the Housing Law. What’s more, two in three believe the law will not solve the current problems.
PerchPeek insights
Having looked at the key details of the new Housing Law earlier in the first section, and the risk of landlords selling up and property supply being impacted, it’s interesting to see this viewpoint being shared both by industry experts and individuals. The stark data on Barcelona and Madrid rental property stock demonstrates that dwindling supply was already a huge issue.
Based on this data and industry viewpoints, it’s sensible for those supporting relocating employees to take the view that this supply vs. demand issue is set to continue, if not worsen.
To support relocating employees:
● Manage expectations from the outset on realistic timelines, costs and competition levels
● Help employees compile the necessary documents to submit applications swiftly
● Review relocation packages to ensure employees can afford to spend at least two to three months in temporary accommodation, to provide enough time to conduct searches
All aboard! Great news for young relocating employees in Spain - in a bid to encourage summer travel across the continent, the price of Interrail tickets will be cut in half between 15th June and 15th September for Spanish residents (EU citizens only) aged between 18 and 30.
Key details on Interrail:
● Interrail allows travel across thousands of kilometres of the European rail network
● Passes are valid for a certain time period, and for a single country or across borders
● Full prices start from €194 for four days of travel within one month across 33 countries
And that’s not all! The Interrail half-price deal is just one of several measures to help young people get around. According to Prime Minister Pedro Sánchez:
“Spain is the second most visited country in the world, but it is full of unknown treasures for many Spaniards. That is why we are going to help our young people to get to know Spain better by travelling through its interior this summer.”
Between 15th June and 15th September, the following will be available for 18-30-year-olds:
● 90% discount on state-run buses and short- to medium-distance trains within Spain
● 50% discount on high-speed trains
Important!
For all discounts here, only EU citizens resident in Spain aged between 18 and 30 are eligible.
PerchPeek insights
Relocating to a new country is a super exciting adventure, and relocating employees are bound to be keen to explore and get to know their new surroundings, both locally and further afield. These discounts present a great opportunity for young assignees to explore and gain fantastic life experiences at a low cost, especially in light of the ongoing cost of living crisis.
To support young relocating employees keen to broaden their horizons:
● Share details of these discount schemes including information on how to apply
● Suggest popular locations to explore - in the city, within Spain or further afield!
● Provide tips on staying safe on public transport, e.g. being vigilant against pickpockets
We hope you enjoyed this month’s update!
If you have any feedback, comments or questions about what's happening in your location, feel free to reach out via the form at the bottom of this page.
Thanks for reading, and see you next month!
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We hope you found this update insightful! We’d love to hear your thoughts.
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