It is a well known fact that Governments are not run by Economists, because then, someone would tell them you cannot spend what you don’t have. Similarly, governments are not run by real estate agents, because then someone would have told them you cannot blanket change the rules without considering the consequences.
For forty years we have been involved with property management and rentals, what recently happened in Spain was applied about 10 years ago in the UK.
The Government in their infinite wisdom decided that tenants should no longer pay fees to a rental agency, consequently the income of the rental agency, halved. What did not get a 50% reduction to compensate were the national minimum wage or above, rental of commercial premises, business rates, heat, light, power, advertising, cars, petrol, servicing, insurances, professional organisations and regulatory bodies – so where did the money come from?
Well, simply, the landlords paid double, consequently, the landlords increased the rents to cover the extra payments, in short, the tenants paid.
Unless there is compensation on expenses to cover a financial loss that is decreed by the Government – nobody wins.
We did warn the Government this would happen at a national think tank, they ignored and proceeded anyway. Rents have almost doubled in the UK as a result of this and of increased interest rates. Wages have not doubled.
Rental Laws in Spain
Meanwhile in Spain, new sets of rules were applied to long term rentals, the first was the removal of tenants fees, consequently, landlords got charged more, so they put the rent up. Tenants lost.
Secondly, the five or seven year rule, meaning if you as a tenant sign a long term rental contract then you have the right to remain for five years (or seven if the property is owned by a company), that is a big ask, both of landlords and tenants.
The result that this legislation brings? Simple, a shortage of long term rental properties, asking landlords to commit their life to five years in support of a complete stranger living in their house is a big ask, consequently, landlords removed their properties from the long term market and resorted to holiday rentals (or “Seasonal rentals”) – the result is a shortage for long term tenants, end result? Higher rents. Who pays? The tenant.
So landlords have migrated to holiday or seasonal rentals (asking for a 6 month rental over winter and the summer months at premium prices) – this too is a nonsense. Why? Economics.
Let’s say the rent per month long term is 1500€ per month – thats 18,000€ per annum, a 6 month let generates 9000€ per annum. The summer months at 10,000€ per annum, so you earn 19,000€ for the year instead of 18,000€.
You’re reading that thinking you’re a grand better off …. however, long term tenants pay the utilities, the internet and normally keep the place clean and tidy. Holiday renters means the OWNER pays the utilities, the internet and the cleaning as well as around 20% of the income to a portal or holiday rental agency. Now the owner is WORSE off.
The next phase of this process is the Government working with local authorities to reduce and curtail the holiday rental market, refusing licenses, null and voiding previous applications, so what do landlords do?
They don’t want to commit to long term rental, won’t be allowed to do holiday rentals, so what you end up with is a whole coast full of properties that are empty.
Not sure how any of this helps anyone…..
However, it should be pointed out that at the moment there is a massive rental demand from both property buyers and prospective tenants, leading to increased property values.
This article is to point out that if nothing is done about the current situation, this demand will almost certainly fade.
Are you a tenant or a landlord that has been affected? We want to hear your thoughts! Also, check out our guide to renting in Marbella HERE
