SIDEBAR.PHP
Categories
We divide our blog into different sections for your convenience:
Buy-to-let is an incredibly popular investment method in the UK but it has still not fully caught on in Spain. This has been due largely to the Spanish rental laws which have historically been extremely rigid as well as the propensity for the Spanish to purchase their homes rather than rent which has held back demand.
However, this could be set to change with the Spanish press revealing that the government is considering further changes to rental laws in order to provide flexibility. There are also currently very attractive rental yields with residential property offering 5.3% annual yields, well above returns available on government bonds and savings accounts.
On top of this the current economic situation in Spain with low wages and a relatively high earnings to property price ratio mean that more Spaniards are being forced to consider the rental option. This rise in demand coupled with further changes in the law which would provide security against defaulting tenants could be the catalysts for a buy-to-let boom.
Market conditions are also close to perfect with property prices having dropped by 40-50% from their peak and now at a point where there is minimal downside but abundant potential upside. Added to this interest rates are at extremely low levels and, although this is not fully reflected in Spanish mortgage rates, they are dropping fast as banks start to lend again.
Regarding the legislation, Spain’s rental law (the LAU) has already been changed once since the crisis with modifications being passed in 2013. The changes gave more power to landlords when dealing with non-paying tenants with the option to start eviction proceedings after just one month of unpaid rent being introduced.
Attempts were also made to speed up the eviction process itself but there have been mixed results on the ground with those familiar with Spain’s legal framework complaining that the application o f the law varies too much from region to region and is dependent upon which judge is handling the case.
For this reason there have been calls for further changes and the government has so far been receptive. Sources claim that the authorities are planning to establish shorter and more strictly enforced periods for evictions as well as measures which will ensure that these time limits will be fully applied in practice.
With the Spanish economy now starting to improve and employment trending upwards there will be growing demand for rentals especially among the younger generation. Recent statistics from Spain’s national statistics institute (INE) predict that the percentage of Spaniards living alone will rise to 12.7% by 2029 from 9.7% today which will also increase demand.
Numerous investment funds which have been buying up Spanish property see lettings as a good option. The Apollo fund which bought 85% of Santander’s Altamira real estate subsidiary earlier thi s year has destined much of the housing under its control to rentals and Andres Rubio, a partner at the firm, says that demand is now growing in the rental sector.
The conditions appear to be primed for a boom in buy-to-lets and on today’s evidence it seems that the situation will continue to improve over the next months and years with new legislation on the horizon, a stabilisation of property prices with medium-term growth prospects as well as an improving economy and favourable demographic trends.
www.spainsolicitors.com