Summary of Spain's New Property Law (Lai de vivienda)

Jul 28, 2024

Highlights of New Spanish Property Law (Lai de vivienda)

Spain is a popular destination for real estate investment, especially for holiday homes & rentals.
The recent approval of the Lai de vivienda introduces changes to property management and rental control.

Context of Economic Struggles

  • Spain's economy has faced difficulties since 2008, worsened by the pandemic.
  • Young people find it challenging to live independently due to high property prices.
  • The new law aims to make rents more affordable and protect vulnerable individuals.

Key Points of the Law

1. Identification of "Zona Tensionada"

  • Defined as areas where:
    • Average rent + bills exceed 30% of average income.
    • Property prices have risen by 5% compared to the retail price index over 5 years.
  • Unclear if it pertains to neighborhoods or larger regions.

2. Definition of "Gran Tenedor"

  • Now identified as individuals or companies owning 5 or more properties (previously 10).
  • This impacts how the law applies to property owners.

3. Rent Control Measures

  • Rental prices can no longer automatically increase with the retail price index.
    • Increases capped at:
      • 2% for 2023,
      • 3% for 2024,
      • A new index introduced for future increases.
  • Large property owners will be affected significantly.

4. Agency Fees

  • Tenants no longer responsible for agency fees; property owners are now liable.
  • Owners can only pass on pre-agreed costs to tenants.

5. Eviction Protections for Vulnerable Tenants

  • A process must be established before evicting tenants earning below a certain threshold (€1,800).
  • Additional consideration given to tenants living in properties owned by large owners.

6. Penalties for Vacant Properties

  • Owners of unoccupied properties may face a tax increase of 50-150%.

7. Tax Deductions for Property Owners

  • Deduction increased from 50% to 90% under certain conditions (age of tenant, refurbishment, etc.).

8. Exemptions for Tourist Rentals

  • The law does not affect tourist apartments, which are exempt from these regulations.

Potential Consequences of the Law

Likely Outcomes

  • Stricter tenant profiles due to increased legal challenges for evictions.
  • Property owners may explore alternative strategies (e.g., renting out rooms instead of whole apartments).
  • Increased interest in tourist properties due to exemptions from the law.

Less Likely Outcomes

  • Possible large-scale sell-offs of rental properties as investors seek to exit the market.
  • Specialized investors may pick up these properties and comply with the law.
  • Long-term property investments will persist despite temporary fluctuations.

Conclusion

  • Investors are encouraged to cautiously consider the implications of the new law on residential property investments in Spain.
  • Look out for updates and keep informed when making investment decisions.

Feel free to leave comments and opinions regarding the new property law.
Stay informed for your future investments.