The Green Deal, the rising cost of household electricity bills and the lack of profitable applications for capital are concentrating investment back into housing speculation and construction, transforming homes, neighborhoods and urban structures.
The electric bill (and gas bill) reshapes your house and takes away your savings
The rise in domestic electricity prices has already begun. The forecast is for the rise in fossil fuels to be equally dramatic. With the immediate prospect of a barrel of oil at $80 and a ton of CO2 at €60, home air conditioning will be left for the rich. This summer not even offices will be sheltered from heat waves... even stores, which have already begun to reflect the new electricity costs in their prices, will cut back on air cooling. And next winter, the gas that powers most domestic heating systems is likely to be much more expensive.
Will more people die in heat and cold waves? Absolutely. But the Green Deal approaches it differently: all the incentives are in place to make it worthwhile for you to spend your savings on insulation and windows. Good business for the construction industry: it will mean 13.5 billion euros for the construction companies' bottom line.
Second-hand purchases increase and rentals become more concentrated
Tenants who spend over 40% of their income in rent by country and age
First impact on the market: energy-refurbished second-hand housing had already started to increase its prices vigorously before the new power bill. 35 Spanish capital cities experienced price rises in anticipation of what is coming now. The average price of all second-hand housing bought in April was already at 3,135 €/m2 in Gipuzkoa, 3,065 in the Balearic Islands and 2,792 €/m² in Madrid.
Real estate companies were rubbing their hands together and stock market expectations, between mergers and business estimates, were soaring. And rightly so: May came to confirm that the momentum was accelerating. Metropolitan areas saw prices rise by 1.7%, and on the coast the climb was as high as 4%.
On rentals, the first reactions are only now starting to emerge. In April, portals mediating transactions between private individuals recorded drops in the major capital cities which still reflected the need for liquid income of a part of the petty bourgeoisie that suffered hard during the last year. Ruined in their main businesses or undergoing temporary layoffs, they have put the homes they owned as tourist accommodations on the rental market and in some cases even their own main home.
Such a readjustment, however, does not worry big capital, which is buying many of these homes. They do not feel the urgency of bankrupt people and know that the future looks bright for them. Even during 2020, in full lockdown, the capital invested in rental housing by the big funds never fell below 7.2% profitability... while the average profitability of Spanish companies was in the red.
That is to say, the drop in rents prior to the new electricity bill is not only temporary, it is serving to concentrate the rental stock more and more in large real estate companies in the hands of funds. A trend that will be reinforced in the coming months when landlords discover that the new energy costs devalue homes that have not been energetically refurbished and face the alternative between going into debt to invest or selling with a margin and for cash to a large real estate company.
The new housing and neighborhoods of the green deal
Madrid Nuevo Norte
The new market has already begun to react as well. With the prospect of refurbishments, some of the demand that would normally go to second hand houses is temporarily going to new builds. There is a rush because the expectation is for a long period of rising prices. The mortgages signed rose by 35% in March... but this is only the beginning.
In fact many investments are being geared toward a type of property development which foreshadows where the next few years are headed: co-livings for young workers, glorified versions of flat-sharing with an omnipresent landlord-company and impressive margins. It increases the otherwise small number of square meters per person over mini-apartments at a lower price at the cost of losing private spaces and living intimately with people you didn't choose. In a nutshell: the glam version of the slum apartment.
The boom is also changing the way construction is done: more prefabricated elements and more industrialized housing with new thermal insulation... and smaller windows... so that the heat won't escape.
And of course, the mega-projects are back. In Madrid alone, the Madrid Nuevo Norte project, the attempt to create a financial residential neighborhood around the Four Towers, as well Valgrande has been unveiled. model neighborhoods by eco-friendly standards according to the EU which are in reality archetypes of social segregation. They use partial social protections to deliver misleading inclusive headlines and greenery and expressways to segregate themselves from the city rather than to merge into it.
And meanwhile... as it couldn't be otherwise in the midst of massive unemployment, pittance temporary layoffs and a general precarization run amok, foreclosures of regular homes grew by over 84% in the first quarter.
The city of the Green Deal is also designed to transfer rents from labor to capital. The cities and housing of this crisis are going to leave you with less space, less privacy, fewer resources for living and fewer spaces for socializing. The transformation has already begun.