THE International Monetary Fund has called on Spain to build more homes in order to ease the housing crisis that is ‘affecting the vulnerable.’
Much of Spain, especially in the big cities and along the costas, has seen a demand frenzy – both from renters as well as buyers – push up prices to sky high levels.
A new report by the IMF has urged the Spanish government to tackle the crisis by increasing the housing stock.
The report recommends this measure over others, such as the recent introduction of price caps in tense areas, which it warns could backfire and end up hurting the most vulnerable segments of society.
“To improve housing affordability, authorities should prioritise increasing supply rather than distorting support for demand,” Kristalina Georgieva said in the report.
Such a measure would lead landlords to lower prices in their attempt to find tenants, the report suggests.
The recommendation comes a day after the government announced its intentions to boost house building to tackle sky-high prices.
The IMF also criticised the 2023 Housing Law’s price cap measures in congested urban zones, which has so far only been implemented in parts of Catalunya.
“Past experiences suggest that such price controls can diminish the rental housing supply,” the IMF notes.
Landlords might take their homes off the market if they cannot freely set rental prices, it is argued.
The knock on of this could be a one-two of a reduction in rental properties and more expensive rents.
“This has happened in other countries when such limits were introduced,” explained Romain Alexandre Duval, head of the IMF mission in Spain.
The IMF report overall lauds the resilience of the Spanish economy, which is currently the darling of the European Union.
It noted strong household purchasing power, public consumption, and robust export performance.
However, challenges include weaker private investment and household consumption, and the need for fiscal consolidation to manage the public debt and deficit levels.