Two articles within the Spanish Property Insight website have caught my attention.
The first refers to the foreign demand for Spanish property coming back, but much less so from the British.Over the last few years in the UK there has been a tremendous amount of negative publicity with regard to the problems that some unwary or unlucky have experienced with property ownership in Spain, with the most recent demolition of two houses in Almeria being a prime example of that. As can be seen from the comments there is so much negativity within the British expat community that they’re certainly not going to be encouraging new buyers. We are certainly seeing a considerable increase in wary buyers wanting building surveys and current market valuations.
The second article refers to the regulation of holiday lettings, referring to Madrid, but with the Spanish government appearing to encourage that as a model for the whole of the country. All holiday lettings have to be registered with the appropriate authorities and will only be accepted if brought up to a certain standard. That’s fine, but there are some people who are looking for minimal rentals, merely a bed for the night, knowing that they will be out all day or possibly all night. They don’t necessarily need all the facilities that are being demanded as standard. Equally, for campo or country rentals where people are wanting to get away from it all, back to nature, they are wanting to ‘rough it’ and the whole experience will be spoiled if everything is brought up to urban standards – if that is indeed possible. In addition, there is a prohibition on any lettings of less than five days. Madness for people who want to travel around Spain on a Campbell Ferguson good morning hello Peter I am I am fine thank you and bed and breakfast basis or for short stay weekend holidays.
As we have been warning for some time there could well be a link between these two items. If all rentals are to be regulated, people are going to be much more reluctant to buy if their budget is based on the fact that they can rent the property for part of the time, which will help in paying the mortgage, IBI, community, etc. Many who already own here will find that they cannot afford to do so and thus that will put more properties on the already overburdened market. Admittedly, many owners probably have rented out the property without declaring the income, but that will no longer be possible or certainly much more risky if the property is regulated. In addition, some mortgages prohibit rentals and again, whilst there may have been a ‘blind eye’ turned by the banks, if the property is regulated it becomes official and cannot be ignored. All of this is going to greatly reduce the number of buyers for properties who can no longer afford it without that income. Additionally, because of the investment that has to be made, the supply of rentals will reduce greatly and the rents charged will have to increase to cover the additional costs.
Yes, this will drive some more traffic towards the hotels, who have been the major instigators and lobbyists for these regulations, but surely they have gone too far this time. It will considerably slow the demand for property, especially in the middle sector thus leaving the overhang of surplus accommodation on the market for many more years and reducing the demand for new build even in the best locations. In addition, it is likely to reduce the number of people coming to Spain because the costs will be higher and they will not be able to get the style of holiday they want. So, the income to the country as a whole will be reduced. Hopefully, the experience of this will be short lived and the regulation will go the way of so many in just being ignored or abandoned because of its detrimental effect. However, if it stays on the law books there is always the fear that somebody someday will suddenly decide to activate it again, seeking the fines and licence fees the property owners will be obliged to pay.
Unfortunately, again, Spain’s politicians and bureaucrats have not thought of the greater good of the country, but only of those shouting the loudest. The market has changed and by being ‘luddite’ in their approach, Spain will lose out.