Blog Post

New Spanish property laws (+taxation) strangle the market a bit more

Spanish policy makers are really working hard in order to make a much more difficult framework for the already declining property market. 2013 is probably the year in which the Government is trying to lock up the domestic property market to overseas investors.

Not only is the Energy Performance Certificate becoming compulsory for sellers and landlords at the worst ever possible time (it is imminent on the 1st of June 2013), but new obstacles for foreign investors are coming into force.

More difficulties to get around, if we want to maintain a positive cash flow property investment business in such a lovely country. There are a few ways to make properties work in Spain… but being honest it is getting harder and we must be really sharp.


1) GOLDEN VISA: Once again the Spanish policy makers are making the wrong decisions to ease the property market. The new “Golden Visa” that entitles non EU property investors to get a residence visa will be for those buying a property starting at €500k instead of at  €160k as was proposed in November 2012.

The half a million euro threshold is a wasted opportunity to increase options for sellers willing to find buyers, and also for overseas buyers to achieve the final step (a residence permit) when buying a property in Spain. When the proposal was announced, in November and December, hundreds of non EU residents were attracted by the announcement placing online inquiries asking for consultation. 97% of them had a budget below the aforementioned €500K and cannot achieve the “Golden Visa” now with the higher threshold. What a pity for the sellers, the buyers, and the business itself.

2) BANNING HOLIDAY RENTALS (ALQUILER VACACIONAL) OF RESIDENTIAL PROPERTIES: This is really frightening! Another brilliant idea from the Spanish government is to start considering leaving the right to rent your property to overseas tourists out of the Spanish legal framework. In this way the Regional governments (Comunidades Autonomas) will be the entities that will allow or ban this option. This is happening now in the Balearic Islands, where flats and apartments cannot be legally rented to tourists. Catalonia and Andalucia could consider a ban as a serious option.

The reason for this consideration from the Spanish authorities is to “protect” hotels and touristic resorts industry against the competition from individual proprietors. If this happens, thousands of owners will be waiting on the decision of their Regional authority.

3) NON-SPANISH RESIDENTS HAVE TO DECLARE OVERSEAS ASSETS: The Spanish government requires that any resident with over €50,000 assets abroad and who lives in Spain more than six months (183 days) of the year must declare what they own abroad. Non-Spanish residents start feeling pressure and certainly many will consider this requirement as an obstacle to come to Spain.

4) NEW RENTAL LAW NOTICE PERIOD: Last week the Ministry of Public Works, Ana Pastor, made the new rental framework public. The most relevant piece is that the tenant can walk away from the contract, giving just a one month notice period only 6 months after the rental period started. This is quite short notice for landlords, especially in the current market climate. Spanish experts have pointed out that this uncertainty could help to increase the rental price because the owners want to have more yield against insecurity. We will see.

On the other hand, the owner can “get rid of the tenants” by giving them a 2 month notice as long as the property is going to be used as a permanent residence.

5) PURCHASING TAXATION: The market needs less taxation for new developments (10%) and second-hand transactions. This is up to the Regional policy makers. Depending on the region, second hand homes transactions tax rates vary between 7% and 8% (as it is the case of Valencia -Comunidad Valenciana.

6) RENTAL INCOME TAXATION: Also, for Buy-To-Let investors, the rental income tax is high: 24.5% . There is a deduction, so not all the income is taxable, and there is also a way to reduce it to 5.25%, but this involves a different strategy for investors.

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