Property News from Spain

If you have a property in Spain or you are looking to buy a property in Spain and want to rent it out long-term or even short-term, being insured is, without a doubt, the only way to sleep peacefully at night and the best way to free yourself from the worries of rental default and property damage.

The best insurance is the one that covers non-payment of rent (Seguro de Impago de Alquiler), but there are policies that cover much more than that. They offer amongst other things advice to the owners on any problems related to the tenancy or the tenants and even problems they may have with the community associations.
It is in essence legal defence insurance that protects the owner against any problem that may arise with the rental of their property, from non-payment to a disagreement with the tenant over who should pay for repairs or problems which may arise with the community or neighbours. legal fees are normally covered in full, in addition, in the event of the tenant not paying the rent, the insurance company will forward you the unpaid monthly payments while the case is being handled whether it be an eviction or a negotiation.

The insurance company will try to mediate with the tenant from the first month that they stop paying, warning them of their contractual obligations. And, in situations where it is not possible to reach an agreement, they will set in motion the legal procedures necessary, allowing the landlords to take a step back and avoid this unpleasant process.

Additionally, insurance companies will also serve as mediators for any problems that may arise between the tenant and the neighbours. This really takes the pressure off and gives you added peace of mind, especially if you are not living in Spain. Insurance companies which centre on this service are professionals and specialised in rentals, so rest assured any necessary procedures will be carried out as quickly and reliably as possible. A claim for non-payment can mean a significant outlay of cash in addition to the lost income from unpaid rent and especially so if you are not present in the country, so having rental insurance can be an important safety net, especially if the property is mortgaged and you rely on the monthly payments to meet your mortgage requirements.

Not all rental insurances are equal, so make sure you check carefully what is and what isn't included and the checks that are made before giving the green light to a tenant. Before taking out the policy, the insurance company should study the tenant's solvency status. It is always better to carry this out before signing the rental contract, as it will be easier to ask the tenant for all necessary documentation beforehand and, if the study is rejected, to find a solution by including additional documentation or perhaps a guarantor.

Rental default insurance policies in Spain usually cover the following:

• Upfront payments of rent due, normally up to 12 months. This starts to be paid when the claim is processed, this will have a retroactive effect.
• Legal defence and claims if the tenant breaches the contract.
• Criminal liability defence
• All lawyer's fees, solicitor's fees and fees included in any management related to the rental.
• Protection against vandalism to the property.
• In the event of an eviction, the costs of a lock and locksmith are included.
• The insured will also normally have a phone line at his or her disposal to resolve any legal queries related to the property.

The price of rental default insurance in Spain varies depending on the services included in each policy, as most companies offer flexible policies with add-ons that can be adapted to the individual needs of each property owner. For example, you can choose the number of months rent you want the insurance to cover: usually, insurers offer up to a maximum of 18 months coverage, although most customers opt for 12 months as it reduces the cost and gives ample coverage for most cases. However, policies are available from around 4 months coverage for short seasonal stays too.

On average, the cost of rental default insurance will generally be between 3% and 5% of the annual rent.

For rental default insurance to be approved, a study of the tenant's solvency will be carried out. Tenants may not spend more than 40% of their net income on rent and one of them must be a permanent tenant with a probationary period or have been with the same company for more than one year. Guarantors can be added if the tenant's income or seniority is not sufficient.

If the tenants are salaried employees, the minimum documentation requested by the insurance companies will normally be the following:

• last two payslips
• employment contract
• ID
• The application form signed by the tenant/s - giving the insurance company permission from the tenant to officially check the documentation.

If the tenants are self-employed, as a minimum, they are asked for:

• Their last income tax declaration (IRPF)
• Their last two payments to the Social Security
• ID
• The application form signed by the tenant/s - giving the insurance company permission from the tenant to officially check the documentation.

And if the tenants are pensioners:

• Pension certificate issued by Social Security
• ID
• The application form signed by the tenant/s - giving the insurance company permission from the tenant to officially check the documentation.

So, if you want to rent out your property or start a buy-to-rent business in Spain and be sure to receive your monthly payments, this route may well be the best solution to provide security and peace of mind for short and long-term rentals. You are effectively bringing on board a property partner who will help you manage your property from a legal perspective and give you financial coverage when necessary.

In the first three months of the year, the price of housing in Spain has fallen by 0.6% year-on-year, slowing the decline of the previous quarters.

The fall in the price of houses for sale in Spain is moderating a year after the outbreak of the health crisis and is approaching a stage of stability, according to a study by the consultancy firm Gesvalt.

The company affirms that in the first quarter of the year the price has fallen by 0.6% year-on-year, breaking with the drop of more than 1% registered in the three previous quarters. Thus, affirming, "it is approaching stabilization, scheduled for the middle of this year."

The company's Research team places the price of housing at 1,388 euros / m2, which means that "it is still above the forecasts made at the beginning of the pandemic, where declines of more than 3% were expected."

At the end of March, seven autonomous communities already registered house price increases. The most notable increases are those of Asturias (+ 2.1%) and La Rioja (+ 1.6%), while the Canary Islands, Cantabria, Madrid, Navarra and the Basque Country have registered increases of less than 1.5%. On the other side of the table, the decreases in Murcia (-2.9%), Aragón (-2.1%), and Galicia (-2%) stand out, which had increased their price in the last quarter of 2020, according to Gesvalt.

After these variations, the Balearic Islands regained the first position in the ranking of house prices in Spain, with an average of 2,324 euros / m2, while Madrid fell to the second position with 2,267 euros / m2, followed by the Basque Country, with 2,232 euros / m2.

At the bottom of the ranking are Extremadura (841 euros / m2), Castilla-La Mancha (€ 857 / m2) and Murcia (€ 984 / m2). They are the only three regions in Spain where m2 currently costs less than 1,000 euros.

In the case of the provinces, there are 19 with a unit value below 1,000 euros / m2, while Guipúzcoa, Vizcaya, the Balearic Islands, Madrid and Malaga register a price above 2,000 euros for each m2.

Despite the price adjustment registered in the last year, coinciding with the Covid-19 crisis, the theoretical effort to buy a home has increased, weighed down by the loss of purchasing power of families. According to Gesvalt, at the national level, the number of years of salary that a middle-income household would need to dedicate to be able to acquire a medium-type home has increased by three tenths, to stand at 7.3 years.

The study by the consultancy firm also emphasizes that "the trend of displacement of demand towards single-family homes and peripheral areas of cities continues, driven by the new needs generated by the pandemic and the rise of teleworking, which reduces the necessary trips to business centres ".

Proof of this is the year-on-year increase in the price of housing for sale in some areas of large cities. In Madrid, for example, the most notable increases compared to last year have occurred in the districts of Moratalaz (+ 3.2%), Vicálvaro (+ 2.5%) and Moncloa (2%), while in Barcelona the main increases were in the neighbourhoods of Hortá-Guinardó (+ 2.7%), Grácia (+ 2.5%) and Sarriá- Sant Gervasi (+ 2%).

In Valencia, these increases are more especially pronounced in districts such as Poblados del Oeste, Ciutat Vella and Quatre Carreres, while in Seville the most striking data are those of Macarena, Casco Antiguo and San Pablo-Santa Justa.

Gesvalt's study also highlights that rental income continues to decline sharply. In fact, in general terms, the fall in prices in the rental market has once again been somewhat more pronounced than in the sale and purchase market.

By provinces, Barcelona is the only one with an income of more than 16 euros per m2 per month, although the average exceeds this level by the minimum. Madrid is the second province with the highest average price (15.08 euros / m2 / month), followed by Guipúzcoa (14.58 euros / m2 / month) and the Balearic Islands (12.97 euros per month per m2). On the other hand, Cuenca, Jaén, Teruel, Cáceres, Zamora and Ciudad Real, provinces where leasing is less established, currently register rents of less than 5 euros per m2 per month.

If we look at the data by cities, Barcelona and Madrid are the only municipalities where the average rent is above 16 euros per month per m2, while in San Sebastián the average is 15.5 € / m2 / month. "In these cities, the average rental prices of 90 m2 houses are around 1,600 euros", Gesvalt emphasises.

On the other hand, the municipalities with more than 50,000 inhabitants with the most affordable rents in Spain are in the provinces of Alicante and Jaen, specifically Elda, Alcoy and Linares (Jaén), with a price below 4.5 euros per m2 per month.

During the year of the pandemic, rents in Spain fell by 3.8%, reaching an average of 10.8 euros / m2 at the end of March. A fall that has been more marked in the large rental markets, led by Barcelona (where they have fallen by 14.3% in one year) and followed by Madrid (-10.7%), Palma (-8, 7%), Valencia (-6.3%), Seville (-6.1%) and Malaga (-5.3%).

And for now, experts foresee further declines in income in the coming months, although stabilization could come from summer, depending on the evolution of the covid and regulatory news.

The Spanish Golden Visa is an excellent way for a non-EU resident to get automatic residency and free right of movement around the Schengen area of Europe. Many countries offer this type of visa for non-EU nationals but the Spanish Golden Visa has many more advantages over those offered in other countries and is most certainly worth considering if you are after EU residency, especially after Brexit.  The Spanish golden visa program has been very popular because it is clear and very prompt. An investment of €500,000 € in the real estate sector will give you the right to family residency. The visa can be renewed every second year and after five years it is possible to gain permanent residency and then after ten years, it is possible to gain citizenship. One main advantage of the Spanish golden visa program is that it is not necessary to live in Spain in order to retain and renew the residency visa permit.

So what is required to get the Spanish Golden Visa?

The easiest and most normal way to get the Spanish Golden Visa is through the purchase of a property or multiple properties for which you have paid at least a total sum of €500,000. This is the minimum investment. As stated you don’t have to do this in one go, you can buy various properties and spread out your investment.  The property or properties, either residential or commercial can be rented out for income. Also, joint investors can combine investments into one or several properties. The property can also be mortgaged for any investment exceeding the minimum amount.

Briefly, what are the advantages of The Golden Visa in Spain?

1. It can be for one or multiple properties

2. It can be anywhere in the country and isn’t limited to one specific location.

3. There is no time limit to meet the investment minimum. You can buy one property now and add then add to your 500k investment portfolio further down the line.

4. Previously bought properties can also be included in your 500k investment portfolio. If you already have a property in Spain that can be used as a part of the investment or if you have already paid over 500k for it then you have already met the requirement.

5. It allows the whole family unit to have freedom of movement in the Schengen area of Europe. This includes children under 18 and parents if they are dependant on you. Children over 18 will need to apply independently unless they are legally dependant on you as well.

6. You do not have any obligation to be in the country, not even for 6 months. Even if you don’t spend half the year in Spain, which is a requirement of a normal residency visa, you will not lose your Spanish Golden Visa.

When comparing current prices to the prices of properties at the beginning of 2020, in nine autonomous communities the price of apartments has increased, while in ten others we can see an increase in single-family properties (detached, semi-detached and terraced housing).

The largest increases in single-family property prices were registered in La Rioja (5.6%), the Balearic Islands (4%), Andalusia and the Valencian Community (both with 3.9%). But there were also falls, in places such as Castilla y León (-3.2%), Aragon (-2.2%) or Navarra (-1.5%).

The main increases in apartment prices in January were reached in Extremadura (5.8%), the Basque Country (4%), Asturias (3%) or La Rioja (2.8%). While in Andalusia (-1.6%), Castilla y León (-1.4%) or the Canary Islands (-1.2%) fell in the year of the coronavirus.

The highest prices for apartments for sale can be found in Madrid (3,115 euros / m2), the Balearic Islands (2,979 euros / m2), the Basque Country (2,787 euros / m2) and Catalonia (2,536 euros / m2). The cheapest, however, are seen in Castilla-La Mancha (963 euros / m2), Extremadura (1,038 euros / m2) and Murcia (1,046 euros / m2)

Regarding single-family homes, the highest prices have been established in the Balearic Islands (3,275 euros / m2), the Basque Country (1,901 euros / m2), Madrid (1,883 euros / m2) and Catalonia (1,805 euros / m2). On the other hand, the prices of the most affordable single-family homes are in Castilla-La Mancha (730 euros / m2), Extremadura (743 euros / m2) and Castilla y León (84 euros / m2).

If we zoom in at the provincial level, 24 provinces saw house prices rise compared to 26 data declines in the rest of the regions. The situation of the flats was somewhat better, with 27 provinces rising versus 23 falling.

Looking at the single-family home map, the highest increases were recorded in Malaga (10%), La Rioja (5.6%), Lleida (5.2%) or Cáceres (5.1%). While the most pronounced decreases can be observed in Palencia (-8.4%), Huesca (-7.4%) or Córdoba (-5.4%).

Regarding the flats, the most notable increases can be seen in the provinces of Guipúzcoa (8%), Cáceres (6.8%), Badajoz (5.3%) or Cuenca (4.7%). On the other hand, the most notable falls in horizontal housing prices have occurred in Córdoba (-5.8%), Salamanca (-4.7%), Palencia (-4.4%) or Ciudad Real (- 3.8%).

Among the prices of the most expensive villas, the Balearic Islands once again topped the list (3,275 euros / m2), this time followed by Malaga (2,377 euros), Guipúzcoa (2,185 euros / m2), Girona (2,016 euros / m2) or Barcelona (1,931 euros / m2). All their prices increased in the year of the coronavirus, except Guipúzcoa, where it has fallen by 1.7%.

The cheapest single-family home in Spain can be found in Cuenca (560 euros / m2), Ciudad Real (608 euros / m2), Ourense (680 euros / m2) or Jaén (695 euros / m2), all with falls during the last year.

Regarding flats, the provinces with the highest prices range from 3,298 euros / m2 in Guipúzcoa, 3,115 euros in Madrid; the 2,979 euros / m2 in the Balearic Islands; the 2,969 euros / m2 of Barcelona or the 2,732 euros / m2 of Vizcaya. Of these large markets, the Balearic Islands (-0.3%) and Barcelona (-1.3%) had year-on-year falls.

Toledo (808 euros / m2), Ciudad Real (861 euros / m2), Ávila (899 euros / m2), Jaén (932 euros / m2) and Cuenca (947 euros / m2). mark the cheapest areas in Spain.

The uncertainty in the real estate market for sales as well as rentals, generated by the economic crisis as a result of the pandemic and restrictions on activity, makes it very difficult to forecast how prices will evolve. According to the Offical College of Real Estate Agents of Spain (COAPI), the decrease in the purchasing power of buyers may lead to a reduction in prices, but there are also other factors that may affect the future evolution of prices.

"If we dared to generalise, which we wouldn't recommend, we could speak of downward adjustments generally speaking, but with an upward trend as demand rises again in the mid-term," they stated. “But it is too risky to make forecasts. To give us an idea, even what happens with the regulation of rentals will influence the price trend. If properties that were destined for rentals move onto the sales market, that will change everything."

In an analysis of micro-markets segmented by neighbourhoods, type of housing or types of market, it can be seen that property prices have not only not decreased, but actually increased. "This is happening with commercial premises located in non-prime areas, as a result of an adjustment in prices increasing since 2008".

When it comes to housing, real estate agents once again emphasise the role of location. Used housing in central areas may have a better evolution than any new housing available in less privileged locations.

Owners and investors are waiting for the new Housing Law and the possible regulation of rental prices before reacting. "In the free market, everything is regulated by the laws of supply and demand: an 'external' intervention causes supply to be reduced and, if demand increases at the same time, the result could be totally different from what was originally expected", they affirm from COAPI.

Among the factors that could occur with a limit to rental income, the most important is a greater demand on the tenant's profile, tightening the conditions of access to housing and consequently penalising the most disadvantaged groups.

On the flip side, the second-home and holiday-residential markets have seen a lesser drop in demand despite mobility restrictions, a drop in tourism and a decline in local demand. From COAPI they point to technology and the innovation of real estate agents as the reason for cushioning the fall, thus also carving a path to recovery in the future.

“Our API colleagues have been able to reinvent themselves, prospecting in other markets that were not the traditional ones and using technology as they had never used it before. Perhaps, thanks to this, the coastal market has been reasonably maintained” explains the COAPI spokesperson. "It is true that there is still fear and uncertainty, but also a lot of desire to work and innovate that, fortunately so far, has mitigated the situation."

(Source - COAPI)

Unsurprisingly, the COVID health pandemic has held back the housing market over the past year. According to INE data, 36,109 house sales were registered in December.

Despite the fact that the number of operations represents an improvement of 3.7% compared to the last month of 2019, it is the lowest figure since August and leaves a balance for the whole of 2020 with double-digit declines (-17.7 %). It is the biggest drop in the last nine years, although it has not been as steep as was predicted during the first wave of the virus.

According to Francisco Iñareta, spokesperson for the website Idealista, “the market has managed to end 2020 with more than 415,000 homes sold, which represents a fall of 17.7% over the figure registered a year earlier. Even so, the decline is significantly lower than expected by many experts and the volume of sales is higher than that produced in 2016, which implies that the announced collapse of the sector has not been such. In addition, during the last two months, we have been observing a higher number of sales than that of the same month a year before. The announcement of the vaccination process seems to be behind this data, and it is possible that the start of it in early 2021 will continue to push sales. If the vaccination system continues smoothly over the next few months, an even greater increase in sales operations cannot be ruled out ”.

Returning to the data from the National Institute of Statistics (INE), the annual drop in home sales by 17.7% is explained mainly by the decline in the second-hand market. As the experts predicted, new-build housing has managed to better overcome the coronavirus crisis and has gained market share: it now accounts for more than 20% of residential property transfers.

Data from the INE place the Valencian Community (132), La Rioja (120) and Cantabria (119) as the regions with the most house sales per 100,000 inhabitants in the month of December.

However, by total number of operations, the ranking is led by Andalusia (with 7,323 housing transactions in the last month of 2020), followed by Catalonia (5,685), Valencian Community (5,261) and Madrid (4,572). In regions such as Aragón, the Canary Islands, Castilla y León, Castilla-La Mancha, Murcia and the Basque Country, more than a thousand house sales were registered in December, while Navarra and La Rioja are the autonomous regions with the fewest operations (below 400 in both cases).

Regarding the interannual evolution for the month of December, there are several communities that have registered strong decreases. While in the whole of Spain the sales registered in the property registers have risen 3.7% compared to December 2019, in the Balearic Islands the number of operations has fallen by 20% and in the Canary Islands, by 16.5%. Navarra (-7.6%), the Basque Country (-6.6%), Madrid (-1.6%) and the Valencian Community (-1.3%) are also negative. Murcia, for its part, has registered more transactions than in December 2019, although the increase is lower than the national average (2.8%).

At the other end of the table are Castilla y León, Castilla-La Mancha, Extremadura, Galicia and La Rioja, with year-on-year increases in December of over 25%. Andalusia and Catalonia have remained above the average, although with increases in the single digits.