Idealista.com’s pitch to Spaniards in their 20s still living with mom and dad is simple: Rent your own place or end up having sex in the back of a cramped car for years to come.
The new 20-second TV advertisement by Spain’s biggest real estate website features still shots of couples and threesomes caught naked in cars with looks of surprise. It’s aimed at 20-to 29-year-old Spaniards, seven in 10 of whom still haven’t left home as Spain’s unemployment rate soars to a record.
“We were brainstorming the moment when people most think ‘I need my own home’ and having sex in a car sprang to mind,” said Fernando Encinar, co-founder of Idealista. “Millions of Spaniards have gone through it.”
Spain has the highest rate of home ownership in the euro zone after Estonia and Slovakia, at 83 percent of dwellings, compared with a 65.5 percent rate in the U.S. The Spanish government is trying to encourage more people to rent as banks give fewer mortgages, making it more attractive for foreign funds to invest in the nation’s 1.5 million of unsold homes. The rental market in Spain will grow to 25 percent of the total by 2015, according to Encinar.
“Youngsters with no deposit saved and permanent labor contract are effectively locked out of the mortgage market,” Encinar said. “We are already seeing part of that huge pent-up demand running into flat sharing as it’s the only option for some.”
There are 25 million homes in Spain, 3 million of which are empty and 1.8 million are rented. Ads on Idealista for rooms in shared rental apartments have surged more than 120 percent to 26,079 in the past 12 months. The company organizes regular gatherings to match up those seeking rooms in shared rentals with people looking for roommates.
In May, Public Works Minister Ana Pastor said she will adopt measures to boost investment in the rental market. The changes would protect landlords by speeding up evictions of tenants who don’t pay, allow landlords to raise rents above the annual inflation rate and reduce the duration of leases.
“There’s an assumption that if the government professionalizes the market, it will be easier for banks to dispose of foreclosed homes,” saidAlexander Pelteshki, an analyst at ING Financial Markets in Amsterdam.
There have been about 330,000 foreclosures in Spain since 2007, according to Plataforma de los Afectados por la Hipoteca, a group known as PAH that supports people who have lost their homes to lenders.
The measures, expected to be brought before congress by year’s end, would encourage foreign funds that are looking to invest in Spain by purchasing apartment blocks and absorbing some of the housing stock, said Fernando Rodriguez de Acuna Martinez, a partner at Madrid-based property consultant R.R. de Acuna & Asociados.
“Funds, mainly from the U.S., are showing interest in becoming big landlords here like those that you have in the Netherlands and the U.S. because they see a huge percentage of the population has been priced out of the buyer market and rentals are the future,” according to Rodriguez de Acuna. “They are awaiting the introduction of these measures to secure legal guarantees before they get their wallets out.”
The Spanish economy, the euro area’s fourth-largest, is mired in its second recession since 2009 after the collapse of a decade-long property and construction boom, which at its height accounted for about 18 percent of gross domestic product. Rents in Madrid have fallen 14 percent from their June 2008 peak. In Barcelona, Spain’s second-largest city, they’ve dropped 20 percent, according to Idealista data.
Youth unemployment in Spain surged to 52.1 percent in May from 45.4 percent a year earlier. The overall jobless rate at 24.6 percent is the highest in the 27-nation European Union. A study by La Caixa coordinated by Almudena Moreno and titled “Transition to Adulthood of the Spanish Youth” found that of those who have found a job, 59 percent have short-term contracts.
“Young Spaniards no longer have the option to move out of the family home as high unemployment and precarious contracts for those that do work means they can’t emancipate themselves,” she said. “Many young people are even emigrating or thinking about it.”
In the first half, the number of Spaniards moving abroad jumped 44 percent from a year earlier to 40,625. Among those planning to leave is Miguel Castillo, who said he’s had to live at his parent’s home in Malaga after failing to find a permanent job even with a fine arts degree and a master’s degree in gender studies. He doesn’t own a car.
“I feel damaged by the system,” Castillo said in a telephone interview. “I have all this education and I can’t do anything with it or lead my life in a dignified way.”
Castillo, 30, said he’s planning to go to the U.K. in October to learn English and find work doing “anything at all” after only finding jobs as a waiter or a supermarket cashier in his hometown of Alhaurin del Grande.
About 60 percent of Spanish newborns have parents more than 30 years old, the highest average among the 15 original European Union nations, according to a La Caixa study published July 10. At the same time, the birth rate, historically one of the lowest in Europe, has been in decline since 2009, according to the National Statistics Institute.
Spanish home prices posted their biggest annual decline on record in the first quarter, falling 12.6 percent, the most since the measurement began in 2008, the National Statistics Institute in Madrid said June 14. Home prices have declined 30.4 percent since the peak in December 2007, according to Tasaciones Inmobiliarias SA, the country’s biggest home-appraisal company.
“Even with the drop we’ve seen already, buyers with cash are making offers with a 20 percent discount to asking prices and those bids are being accepted,” said Cesar Oteiza, Idealista’s other co-founder. “Home prices are down so much and there’s more on sale, yet to young people buying is more out of reach than ever.”
Idealista advertises about 686,000 homes on its website, more than double the amount in 2010.
In the first quarter, the number of home sales was 72 percent below their peak in the second quarter of 2006, according to data from the Ministry of Public Works. Spanish banks granted 21,498 new mortgages in April, an 83 percent drop from the peak in January 2007, according to the Bank of Spain.
Rodriguez de Acuna said young people represent the majority of current and future demand for homes and mortgages in Spain.
“We’ve never seen the suppression of this element of demand on such a scale,” he said. “It will affect home sales and lending for years and years to come.”
Spain is negotiating a bailout for its banking industry, which was once the envy of Europe. Souring real estate helped drive bad loans to an 18-year high in May and forced the government to seek European aid.
The extra yield investors demand to hold Spanish residential mortgage backed securities above benchmarks has widened 165 basis points, or 1.65 percentage points, to 615 basis points in the past year, according to JPMorgan Chase & Co. data. The spread is 1.15 percentage points greater than for similar Italian home loan bonds and more than five times the level for U.K. debt.
While Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s largest lenders, remain investment grade after Moody’s Investors Service cut their ratings last month, at least a dozen other banks have been lowered to junk.
Ratings downgrades raise banks’ funding costs, forcing lenders to rein in loan-to-value ratios, which were as high as 120 percent during the nation’s real-estate boom, to 80 percent. They also more carefully examine mortgage applicants’ ability to pay, according to Encinar.
Idealista’s ad aimed at encouraging rentals, entitled “Caught in the Act,” has been banned in Italy. The uncensored version can only be shown in Spain after 10 p.m. It has received 400,000 viewings on video-sharing website Vimeo, according to Encinar.
“It’s a testimony to the fact we have really connected with how young people feel today,” he said.
To contact the reporter on this story: Sharon Smyth in Madrid at firstname.lastname@example.org.
To contact the editors responsible for this story: Andrew Blackman at email@example.com; Rob Urban in New York at firstname.lastname@example.org.