In the Spanish real estate market, the volume of transactions and the number of mortgages are declining, at the same time, housing prices in 2023 are 7% higher than in 2022. Supply is declining, but demand is growing. As Idealista notes, other inconsistencies are being finalized on the eve of the New Year 2024.
Housing Law
Experts emphasize that the housing law did not achieve the goals set by the government, but rather led to the opposite effect. Recall that in May 2023, the Senate approved a law prohibiting rent increases for expenses not stipulated in advance in the contract, such as utilities and garbage collection. The category of landlords includes owners of five real estate properties (previously at least 10 were required). The requirements for this have been tightened.
There is also a tax on real estate that has been empty for more than two years, and the amendments affect the owners of at least four properties. The increase to the standard tax can reach 150% (now 50%). Developers are required to allocate 30% of their funds for the construction of new social housing facilities, and a limit on the cost of rent has been set.
In tense areas, any rental rates are frozen. These are areas where rents and basic real estate costs exceed 30% of the average income of residents or where property prices have increased by more than 3% over the past five years. In addition, it is forbidden to evict insolvent tenants, which is especially surprising, since the alienation of housing is already a very big problem in Spain. This is due to the fact that home invasions are already a very serious problem in Spain. In addition, Ocupa often uses rental schemes to block owners by refusing to pay. Court proceedings can drag on for years. In addition to the legal costs, significant capital repairs will have to be incurred.
Rental Market
The government claimed that the new law would solve the rental problem, but in fact it only made the situation worse. As a result, the number of offers decreased sharply, and prices jumped: at the end of November, the cost of rental real estate was 9.2% higher than a year ago, and reached 11.9 euros per square meter. In the main markets, the price increase was even more noticeable:
- Valencia - 21.6%;
- Palm tree - 19.3%;
- Malaga - 15.2%;
- Barcelona - 14.4 %;
- Madrid - 12.4%.
The market is shifting from long-term to seasonal rentals. It has become much more difficult to rent a house. The number of rental offers decreased by an average of 12%. In Madrid, their number decreased by 26%, in Malaga - by 23%, in Barcelona - by 12%.
At the end of the third quarter of 2023, seasonal rentals already accounted for 10% of the total supply, which is 40% more than last year. In San Sebastian, this figure was 32%, in Barcelona - 28%. In Madrid, this figure is 11%, and in Malaga - 15%. Experts expect that the share of seasonal rentals will continue to grow in the main markets. Homeowners will face increased demands for legal protection, and landlords will become even more vigilant to avoid the risk of non-payment and home invasion. Prices will also continue to rise. All this will lead to a decrease in housing affordability for many potential tenants.
Home sales
In the sales market, prices are rising against the background of a decrease in the number of transactions, especially in the Balearic Islands, Madrid and Barcelona. House prices in Alicante and Palma increased by 15%, and in Valencia and Malaga - by 14% and 13%, respectively. Demand has shifted strongly towards the suburbs, with half of all transactions being made without a mortgage.
The number of purchase and sale agreements in 2023 will be less than 600,000, which is 8-10% lower than in 2022; the number of mortgage loans is expected to decrease by more than 25% year-on-year until 2023; the number of mortgage loans is expected to decrease by more than 25% year-on-year until 2023 of the year. High demand, an increase in the number of households and a reduction in supply will continue to increase price pressure in 2024 in the busiest markets, while stabilization or a slight decrease is expected in other markets. However, there remains a risk that Europe could fall into a more serious recession, in which case the situation would be even worse.
Profitability
According to Idealista, the highest rental yields are observed in the provincial capitals of Spain - Murcia and Lleida - 8.3 and 8%, respectively. In Urb, the rate is 7.6%. In Jaena - 7.3%, in Castellon - 7%, in Barcelona - 5.8% and in Madrid - 5.2%.
Other indicators.
- Cadiz and Pontevedra (4.8%);
- Pamplona and La Coruna (4.7%);;
- Palm tree (4.5%);
- San Sebastian (3.8%).
In the second quarter of 2023, the highest gross yield was 14% in the city of Parla. The average rent was 9.4 euros per square meter, and the required investments ranged from 120,000 to 200,000 euros. In some areas, a yield of more than 8% can be achieved for less than 80,000 euros. Examples include Talavera de la Reina, Alcoy, Ferrol, Reus and Santa Cruz de Tenerife.
New laws, squatting and rental rules have significantly reduced the attractiveness of Spanish real estate for foreign investors. According to the General Assembly of Spanish Notaries, 67,983 houses were bought or sold by foreigners in the first half of 2023, which is 7.5% less than in the same period of 2022. At the same time, the share of visitors in the total number of transactions in the country reached a record high of 21.4%, which is due to a significant decrease in activity in the real estate market at the local level. The leading group with 6,498 transactions remained British citizens. They are followed by Germans and Moroccans. Russians set a 10-year record for the number of transactions (+50.2%), but this is only 2,137. In Georgia, Russians bought about 6,000 apartments in 2023, while the rental yield averaged more than 9%, and for some objects it approached 20%. According to experts, profitability in Spain in 2024 will grow only in very dynamic markets such as Madrid and Barcelona, while in other regions it may remain at the same level or even decrease in areas with low demand.