Impact Housing Act on Spanish Real Estate Market

What changes does the 12/2023 Housing Act introduce on the right to housing? 

The Law 12/2023, of 24 May, on the right to housing is the most recent modification of the housing legislation and its impact on the market of buying and selling, and renting in Spain. New implementations in the new law are: the reduction of rising rental costs, support for economically disadvantaged families and provision of affordable housing to young tenants, among others. 

How was the cap on lease renewal increase evolved in 2023? 

In December 2023, the cap on rental contract renewal increases was 2%, however, it has significantly increased during the year, and is expected to reach a 5% increase in 2025. It is worth mentioning that in order to avoid excessive rent increases and to ensure reasonable adjustments, the National Statistics Institute (INE) has established a new reference index.

What are the new tax deductions for landlords in stressed market areas?

1. If they reduce the rent by 5% from the previous contract, they will receive a 90% reduction for rental properties in `stressed market areas` or `stressed areas`

2. 70% deduction when renting to 18-35 years old in stressed market areas

3. There will be a 60% deduction for newly renovated properties

How does this affect the Spanish property market? 

In Madrid, house prices increased by 20.8% year-on-year in April, reaching an average of 5,188 euros/m2, making it the fourth city in Spain to reach record highs in houses prices. 

Currently, house prices in Madrid are 15% above the levels recorded during the 2007 housing bubble.

In Barcelona, on the other hand, the price increases has been smoother, with a 3.8% year-on-year increase in April, reaching 4,591 euros/m2.It stems from the legal uncertainty of the political climate of independence and the legislative changes that have affected the real estate market in the city.

Most Relevant information on the Real Estate Market in Madrid

1. Market Dynamism: Madrid is the powerhouse of the Spanish real estate market, with most of its districts exceeding the average price of housing at the national level.

2. Rising Prices: The average house price has increased, with a 17,7% year-on-year increase in April 2024, reaching 4,046€/m2

3. Attractive Districts: Districts such as Salamanca, Chamberí, Moncloa-Aravaca, Centro, Tetúan, Retiro and Chamartin, have experienced significant increases in housing prices. All being areas from which a significant short-term profitability can be obtained from properties bought with the purpose of being rented. 

4. Return on Investment: The prime square meter has risen by 7,6% in the last 12 months in Madrid, making it the European city with the highest revaluation. 

Most relevant information on the Real Estate Market in Barcelona

1. Contained Evolution: Barcelona is experiencing a more contained evolution, with a weaker demand and a wider supply, which reduces the pressure on prices

2. Moderate price increases: the intensity of the increase is much lower than in Madrid. For example, only Sant Andreu registered an increase of over 10% with a rise of 10.4%

3. Booming areas: Districts such as Horta Guinardó and Eixample are experiencing price increase due to their good connectivity, significant urban redevelopments and new developments, which is attractive for young families

4. Price per Square Meter: The most expensive areas of Barcelona include Sarrià-Sant Gervasi, Eixample, Les Corts, Gràcia, Ciutat Vella and Sant Martí, while the cheapest neighborhoods are Nou Barris, Sant Andreu, Sants-Montjuïc and Horta-Guinardó.

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