Profitability of residential rental properties and their relationship to systemic real estate risks

Abstract

Between 2011 and 2021, the number of households in Spain renting increased from 13.5% to 15.9% according to data from the National Institute of Statistics. The residential rental market has become a focus of attention for real estate investors in recent years, despite the slowdown that professional investments in Buil-to-Rent have recently experienced. On the other hand, most of the rental housing market, traditional rentals, is in the hands of small private owners. With all this, the real estate sector has proven vulnerable to different types of risk that may make it impossible to achieve the expected returns. The rental market is not immune to these types of circumstances. This work studies the relationship between the evolution of the rental price of real estate and the evolution of systemic risks such as economic growth, the level of income, and employment. The work is carried out in the territorial context of the municipality of Seville. The results are compared with a previous study where the evolution of prices was considered for properties for sale. © 2024 by the authors.