New Housing Law Triggers Drop in Rental Apartments in the Balearic Islands

Ibiza Incorporated - IBZ INC - All Things Ibiza - NEWS Update

Impact of New Housing Law: Decrease in Rental Apartments in the Balearic Islands

Introduction

The aftermath of the approval of a new housing law in the Congress of Deputies almost three months ago has sent ripples through the real estate landscape. The unintended consequence of this legislation has been a notable reduction in the supply of available rental housing, a situation that has not gone unnoticed by real estate agents. This decline is particularly concerning given the existing constraints on the rental market due to high property prices in the Balearic Islands.

A Market in Retreat

José Miguel Artieda, the President of Real Estate Agents (APIs), discloses that this decrease has manifested not only in the Balearic Islands but across Spain, with drops that surpass even the 10% mark and extend to as much as 20% in regions like Catalonia. This unwelcome trend is primarily attributed to homeowners’ preference for leaving their properties vacant rather than adhering to the legal obligations imposed by the new law.

Impact of the Housing Law

Artieda delves into the particulars of the Housing Law, revealing that its stipulations have had a profound impact on the market. The law mandates automatic annual renewal of leases for up to five years, upon the tenant’s request. Additionally, the lease is extendable for an extra year, effectively ensuring that tenants can reside in the same property for at least five years. In instances where the homeowner is a major landlord, this period extends to seven years.

Driving Factors of the Contraction

The surge in rental housing contraction is fundamentally tied to homeowners’ response to the law’s requirements. Faced with the prospect of long-term tenancies, many owners are opting to withdraw their properties from the rental market entirely. Artieda predicts that this phenomenon will persist, with property owners preferring to leave their properties vacant rather than commit to rentals spanning a minimum of six years.

The Balearic Islands’ Case

A similar trend emerged in the Balearic Islands upon the introduction of their own Housing Law. Major landlords sought to circumvent the new regulations, which mandated the relinquishment of vacant properties to the Administration for a period of seven years. To evade this, numerous properties owned by banks and major landlords were diverted to the sales market or the real estate sector.

Future Implications

Artieda’s projections could bear far-reaching implications. If property owners continue to withhold rental properties due to the law’s stringent requirements, it may prompt some owners to consider selling these properties. However, Artieda cautions that these vacant properties may only serve to bolster the already substantial inventory of empty homes in the Islands, which currently stands at over 105,000 residences according to the latest Housing Census released by the National Statistics Institute.

Challenges and Realities

The President of real estate companies highlights that many of these vacant properties remain unrented due to the legal complexities of the law. However, he also underscores that a significant number of vacant properties in inland municipalities are in a state of disrepair, making their renovation unviable from an economic perspective for property owners.