hey guys Spain is a very popular country when it comes to real estate investment many people buy Holiday Homes here buy apartments and rent them out during the holiday season or even invest in residential real estate but last week the Spanish Parliament approved the Lai de vivienda which is a new property law and this new law brings in some new elements that change the way that rental properties will be managed and controlled going for the last one I'm going to talk through in this video I'm going to break down the key points of this new law that's been passed through gonna have a look at some of the potential consequences what people are saying about this new law and then I'll finish by giving my opinion so let's get right into the video now since 2008 Spain's economy has been in a pretty difficult situation and it took years to recover before the pandemic set the economy back further and as a result a lot of Spain particularly young people have faced economic hardship which has made it harder for them to become independent from their parents to move out get their own places whether it's to buy or rent it essentially makes the process of moving out and living on your own as a young person particularly difficult in Spain what this new law is supposed to do is to try and make the situation on young people a little bit easier both in terms of making rent more affordable for them and at the same time also protecting people who are in a vulnerable situation and we'll look into these details as we go through the key points of the law now let's go through the key points of this law and we're going to start with what's known as a thona thincionada in Spanish which I'm not exactly sure how he would translate this into English but essentially under this law such a Zone would be defined as an area where the average rent or average mortgage payment plus the bills exceed 30 percent of the average income for that area in addition the average property price increased in this area would have increased by five percent versus the retail price index in Spain uh over the course of five years so if both of these criterias are met then you have what is known as a thunder under this new law now what kind of area are you talking about here we don't really know it could be a referring to a particular neighborhood it could be returned to an entire city could be referring to a province could be referring to an entire autonomous community in Spain that's not yet clear so I guess with time that will become a bit more clear the second key point in this law is the definition of what's in Spanish and this is someone who essentially has under this new definition five or more properties in their name now this can be an individual person or it can also be a a company that owns property so if you have five or more you're considered someone who has a large property portfolio if you have four or less you're considered a small property or let's say and so previously the definition of ungrounded was to have 10 or more properties so the number of properties has now been brought down from ten to five so if you have more than five then you can send it a large property holder and this is important because this definition essentially affects how this entire law applies to you and how this affects people becomes apparent when it comes to the third point which is rent control under this law now the law that governs rental contracts in Spain is known as the lady which would essentially be the rental property law and under this law as a property owner you're allowed to increase your rental prices every year in line with Spain's retail Consumer Price Index so from one year to the next you know the retail price index went from three percent to five percent then you would be entitled to increase your rental prices five percent because that's in line with the retail price index needless to say that due to the inflation situation in Europe a lot of people have seen significant increases in the price of rent uh over the past few years and what this part of the law does it essentially decouples rental prices from the retail price index and is going to regulate them differently so in 2023 the price of rental contract would not be able to increase by more than two percent in 2024 it would not be able to increase by more than three percent and in 2025 now this is particularly applicable for the grand generals that we just defined before is that there's going to be a new index that's going to be created which will determine how much a rental contract price can be increased year on year how this index will be calculated what it will look like again no one really knows there's not been any detail given only that a new index that's separate from the retail price index will be created the government rental contract increases also when it comes to rental contracts now if I'm a potential tenant for a new property I go and I sign a rental contract if I go through a real estate agent then I'm gonna have to pay an agency fee and it will be me that pays it now this new law what it does is it says the tenant is no longer responsible for paying this agency fee but rather it is the property owner that will have to pay that fee to the estate agent however Property Owners as part of their rental contracts can pass on some of the general costs of you know owning the property to the tenant nevertheless if a new cost were to arise in the middle of the rental contract you know the property owner couldn't just increase the rent to reflect that accordingly only costs have been pre-agreed or agreed with the tenant can be passed on essentially so if a new cost were to appear tomorrow a property order wouldn't be able to increase the price of their rent to reflect that now one point in this new law covers evictions of vulnerable people and vulnerable families silver property owner wants to evict someone who's fallen way behind on rent or is simply not paying rent while staying in their property then what's been added in as part of this new law is like an intermediation process between the property owner and the Tenant and so if a tenant Falls below a certain income threshold about 1 800 Euros they'd be considered in in a vulnerable situation and they'd have to go through this process and the Tenant would also will be given more consideration if the property owner was you know a large-scale property own if they had five or more properties as well so the new law tries to offer some kind of support to people in vulnerable situations this way by adding in additional considerations before uh you know an owner can can evict them from the property next when it comes to the case of a vacant property then it is possible that the owner could receive up to a 50 or 150 percent increase in the EB which is the annual property tax here in Spain so essentially if you have a property and it's not rented out and it's just sitting there then it's a possibility that your annual property tax could increase as a penalization of your property essentially being tax incentives now when it comes to property uh owning and renting it out in Spain and Property Owners can get up to a 60 deduction um on their rental properties under this new law that will change it will go from from 50 up to 90 and this will depend a multitude of factors such as if you're renting your property out in one of these Donuts if you have a tenant who is 18 to 35 years old and also if you have you know if you've done refurbishments or Renovations on your property that can get you up to 90 adduction as well so the frisco incentives have changed a little bit generally lower but there is a possibility to get higher deductions as well uh based on you know different criteria and the final Point relates to the tourist departments and it's essentially that uh they are not under the scope of this new law so anything related to tourist Apartments is not governed by this new lady so there's a lot going on in this new law as you can see as part of the law as well there is also a provision that gives the autonomous Community some level of degree as to what extent they apply this so it's also very possible that you know where the opposition parties govern such as in regions like Madrid and the lothia that this law may not be applied to its full extent now thinking about what this means for consequences both for property owners for tenants I've put together a list of of thoughts and opinions not all of them are my own some have heard them elsewhere from other YouTubers from other property investors that I know um so you know this is kind of a mixed bag of opinions so I'll start with what I believe to be like likely things that will happen then we'll move down to perhaps less likely or even extreme scenarios so what will very likely happen is that the requirements that property owners ask for for their tenants will become significantly more difficult because of the increased legal challenges of removing um someone who does who's not paying for your property from it and also considering that they'll almost certainly be a loss in profitability for the the property owners then of course they'll most likely ask for much you know stricter profiles for the tenants that are applying to to you know rent there be their tenants an idea that was floated to get around this concept of being a large-scale property owner was to perhaps set up multiple companies or or have you know four in your name four in a company and then for anymore you know you keep setting up companies so that you never have more than four at a time and that could perhaps you know increase your profitability because it would exempt you from being controlled by this this new index that's going to be implemented some smaller scale property investors as well may change up their investing strategy and they may go from renting out entire Apartments to one or two tenants or family for example to split in an apartment up into rooms and renting out individual rooms because that can generally give a higher level of profitability for property owners as well so you know that's another option that they could look at and it might be that there's more of that offer on the market if if more property investors were to switch over to that approach well it will happen on a large scale I don't know because you know managing a property that's been rented out room by room is significantly more work but if profitability is is so important then it's something that property owners could look to do equally as tourist departments aren't affected by this then property investors may look to invest more in in tourist properties and try and get profitability but at the same time there's a lot of Regulation governing that as well there are a whole lot of licenses and processes that are required to go through particularly in cities like Barcelona where there are big numbers of tourists then you know renting out a holiday apartment it can be pretty tricky and and even impossible to some extent and now perhaps a less likely scenario though somewhat possible would be a large-scale sell-off of of investing properties so you know investors that have rental properties just getting them off the market because you know they don't want to deal with this new legislation essentially they don't see real estate investing as profitable anymore and they just want to get rid of it now is it possible that no one else wants to buy them yes and that would false High house prices down probably but in reality you know there's always someone looking to invest in real estate and in that case I would think probably specialized real estate investing companies would probably pick up those properties and then they would be um obligated to respect you know the new law and then from there it would perhaps make renting a property easier for young people and at the end of the day you got to think that people who invest in real estate are generally investing for the long term we're talking decades here countries go through political and economic cycles and have done for centuries so this is nothing more than you know something else as part of an economic and political cycle in Spain so if you're investing long term in real estate then you may not be too concerned by this and you may still be willing to invest in Spanish property and particularly when you think about like rent control and rent caps you know there are European cities like Berlin and Paris where this is effective can't talk too much about Berlin but if I were to talk from Paris you know even though there are rent controls in place the Parisian rental market is incredibly incredibly competitive it's very difficult to get an apartment so you know that if you're a property owner in Paris it's very unlikely that you're going to have a long a long-term vacancy and a rental property and you know rental markets in Madrid and Barcelona are very Akin and there's constant demand for rental properties there as well so I think if your property owner in Barcelona you're probably going to have someone in your property most of the time which will reduce the risk of you having to pay extra on your property tax so overall I think me as a potential property investor in Spain I'm gonna hold off investing in residential property for now see what happens as you'd have seen on the channel I do have you know a storage unit here and I will perhaps consider you know buying more storage units because again this is something that's not regulated by this new property law and and generally storage units you know you don't have the hassles that come with residential property nevertheless there's no doubt that you know Spain has a particular charm to it that draws a lot of people and both on holiday and and for longer term purposes as well you know and what are those people that go join here for that reason and you know regardless of the economic reasons and the political context you know there will still be people I think that want to invest in Spain and if you are looking to buy property in Spain you know whether it's a rental property uh residential rental you know a tourist apartment or you know a second home like a holiday home then do just keep in mind some of the points of this new law that's being introduced when you make your decision to invest and if it is a holiday home that's going to be empty for a lot of the year then do keep in mind that you are going to probably pay more property tax and that you should do everything you can to keep that property secure so that's all for today's video guys I hope you found it interesting I hope you found it informative as well leave a comment and let me know what do you think of this new new property law and would it change your opinion on investing in it until next time I'll see you on the next one and let's get this money foreign