Deutsche Hypo: Spain’s RE Market Records Highest Growth in Europe

7 May 2019 – Cope

The Spanish real estate market recorded the highest growth in Europe during the first quarter of 2019 (3.8%) with respect to the previous quarter, to reach 199.3 points, according to the Deutsche Hypo Estate Economy Index (Reecox). Moreover, the Spanish real estate sector is forecast to grow by more than the European average this year (2.1%).

The Director of Deutsche Hypo’s branch in Madrid, María Teresa Linares, says that “the formation of a stable Government will be fundamental for ensuring economic consolidation and the adoption of the reforms necessary over the long term”.

The Reecox index reflects the quarterly evolution of the real estate markets in Germany, France, Great Britain, Poland, Spain and the Netherlands on the basis of five variables.

Original story: Cope 

Translation/Summary: Carmel Drake

The Government Puts the Eurocis Complex in Central Madrid up for Sale for c. €196M

16 March 2019 – Crónica Global

The Spanish Government has authorised the sale by public auction of a set of offices, storerooms and garages in central Madrid, known as the Eurocis complex. The complex, which comprises 94 registered assets spanning an office surface area of 45,937 m2, plus 396 parking spaces, 1 commercial premise and seven underground storerooms, is located in the Salamanca district in the block bordered by Calles María de Molina, Núñez de Balboa, General Oraá and Castelló.

The asking price is €196 million and candidates have two months to submit their offers in closed envelopes. Until last year, the complex used to house several departments of the Ministry of Finance, but its urban planning classification means that it could be used for private purposes in the future. The future buyer is expected to completely renovate the building and convert it into modern offices or a large shopping centre.

Original story: Crónica Global 

Translation/Summary: Carmel Drake

The Government’s New Rental Act Limits Annual Price Increases to CPI

1 March 2019 – Eje Prime

On Friday, the Government approved a new Rental Act containing urgent measures for the rental sector, including a limit on annual price rises for new contracts to CPI. However, in the end, no IBI rebate incentive was included to reward landlords for maintaining rental prices below the reference price index.

The measure to limit rental price increases will take effect for new contracts signed from the date that the law enters into force.  Moreover, the law provides for the preparation of a state-managed house price reference index within eight months, which will be updated annually.

In addition, the law extends the period for extending rental contracts to five years, from the current term of three years.

Original story: Eje Prime

Summary/Translation: Carmel Drake

Spain’s Real Estate Sector Condemns the Government’s New Rental Act

1 March 2019 – Ok Diario

The real estate sector has expressed its widespread disapproval of the Royal Decree Law approved by the Government on Friday containing urgent measures for the housing and rental sectors.

Investment funds, real estate experts and rental associations alike have all condemned the new law as discriminatory, restrictive and short-termist.

Claudio Boada, Head Consultant at Blackstone España, said that the new legislation will undoubtedly result in more upwards pressure on prices and a reduction in supply, whilst sources at Fotocasa criticised the lack of tax incentives for landlords who rent their homes at affordable prices.

If this royal decree is ratified, then “rental contracts will have been subject to three different sets of rules in less than three months”, observed Gustavo Rossi from Alquiler Seguro, which is both confusing and unsustainable.

Original story: Ok Diario 

Summary translation by: Carmel Drake

PSOE & Podemos to Save the Rental Reform without Price Limits

27 February 2019 – Cinco Días

Despite the initial disagreements and failures, all indications are that the Government and Podemos are going to end up rescuing the Rental Act. The Executive is expected to present new text to the Council of Ministers on Friday, which will not include limitations on rental prices, but which will reflect significant changes with respect to the text that was toppled a month ago. Those changes include: the compilation of an official price index in large cities; updates to rents subject to CPI; and greater guarantees against evictions, according to reports from El País yesterday.

The draft being finalised by the Executive does not include any measures regarding limits on rental price increases, but it does propose compiling some official price indices to serve as a tool for autonomous regions to establish their own housing policies, since they have the authority in this regard.

Podemos, a key partner to enable the validation of the Act regards this measure as insufficient but sources in the party acknowledge that they would have to concede to save the other improvements proposed by the text and reverse the harmful measures introduced by the PP in 2013. One option being considered is an 80% discount on the IBI charge for those owners who comply with the price index (…).

Another feature of the new text is that the update to rental prices during the term of a contract may only be subject to CPI, something that used to be included in the Urban Rental Act until the PP eliminated it in 2013.

The Act also recovers the increase in the duration of contracts from three to five years, or seven in those cases where the owner is a company, but also adds that all contracts will be valid, regardless of whether they are registered in the Property Registry (…). Another initiative included in the draft text, to provide greater security to tenants, are the notice periods for the non-renewal of contracts, which increase from one to four months in the case of owners and from one to two months for tenants.

The new regulation will also include enhanced guarantees against evictions (…).

Original story: Cinco Días (by E.C.)

Translation: Carmel Drake

Rental Contracts Will Be Governed by the Urban Rental Act Again From 23 January 2019

22 January 2019 – El Confidencial

Rental contracts that are signed from tomorrow will again have a duration of three years, regardless of whether the landlord is a physical person or a legal entity. Also, landlords may require future tenants to provide more than one month’s deposit, as well as any additional guarantees that they consider appropriate, either in cash or as a bank guarantee.

Royal Decree-Law 21/2018, dated 14 December, governing Urgent Measures in terms of Housing and Rents, published in the BOE on 18 December, has had a very short life, given that it has not been ratified by Congress today, in such a way that all of the rental contracts that are signed from tomorrow onwards will be governed once again by the Urban Rental Act (LAU) approved in 2013. The result of the vote was 103 votes in favour versus 243 votes against, plus one abstention.

In the way, the Government has today suffered its first major defeat in Congress, after the majority of representatives voted no to the law on rental, which was only supported by the PNV and PDeCAT in the end. The decree was completely rejected by Unidos Podemos, which was not happy that the Executive had ignored its main demand to move forward with the budgets: to limit rental prices in those markets with greatest tensions and highest prices. PP, Ciudadanos and ERC joined the Purple Party in their rejection of the decree (…).

All of this means that for practical purposes, the rental market will once again be governed in accordance with the legislation set out in the LAU of 2013, whilst all of those contracts that were signed following the approval of the royal decree in the BOE to date will continue in force in accordance with the provisions thereof.

Three-year contracts and larger deposits

The parties may negotiate freely regarding the duration of contracts, nevertheless, the obligatory extension of those contracts shall be three years. In other words, although a landlord and tenant sign a one-year contract, the tenant will have the right to extend that contract for a total of three years. The tacit extension, in other words, after those three years, and provided the parties are in agreement, shall be one year.

“The landlord can demand whatever deposit he wants for the rental of a home; the decree law limited that figure to two months. In this way, the owners of flats will be able to continue to ask for bank guarantees or bank deposits, as well as a normal deposit”, explained Francisco Javier Fajardo Fernández, Professor of Civil Law at the University of Navarra (…).

Regarding those parties who have signed a rental contract in the last 35 days, he indicates that “it would be normal for citizens to sign rental contracts for a year, but those that have signed contracts in the last 35 days could be subject to a mandatory extension of up to five years. The law would cover them, although it is possible that some landlords will want to modify their contracts to apply the current law (…).

“Contracts signed between 18 December and 22 January shall be subject to a special regime with respect to the contracts signed from tomorrow onwards (…)”, said the Professor from the University of Navarra.

The return of the law from 2013 also means that landlords will be able to recover their property to use it as a permanent home in certain cases after the first year of the contract term (…).

Rental updates

On the other hand, regarding updates to rental prices, another controversial topic, according to the royal decree, if the contract does not explicitly specify that the rent will increase each year, then there shall be no rent increase. By contrast, under the law from 2013, even though the contract does not specify it, rental prices are updated each year in line with CPI – the typical rate used – or the index specified – and, if there is no mention of any index, the consumer guarantee index (IGC), approved by the Disindexation Law of 2015 (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Revised Legislation: Socimis to Pay Tax of 15% on Retained Profits

11 January 2019 – Expansión

The General State Budgets for 2019, which are going to be approved by the Council of Ministers today (Friday) and which are going to be presented to the Congress on Monday, will include a tax charge on the undistributed profits of Socimis, to which a tax rate of 15% will be applied, according to reports made by sources speaking to this newspaper. The measure was agreed between Podemos and the Tax Authorities although the Government did not include it in the Budget Plan that it sent to Brussels in October or in the draft bills that are already being processed. The General Secretary of Podemos, Pablo Iglesias, blames the Socimis for the “rental bubble”.

This measure follows other initiatives agreed with Podemos, which cause the greatest impact of the increase in taxes set out in the budgets to fall on companies: they include a tax of 5% on overseas dividends and the imposition of a minimum taxable base of 15% in terms of Corporation Tax, which will be added to the draft bills to create the Google tax and the Tobin tax.

Socimis (Listed Public Companies for Investing in the Real Estate Market) were created by Zapatero’s Government in 2009 to revitalise the real estate market. They enjoy a very beneficial tax regime. The rate of Corporation Tax applicable to them is zero, provided they fulfil a series of requirements: their minimum capital stock is €5 million, which may be invested in a single property; a minimum of 80% of the profits obtained from rental must be distributed in the form of dividends; and a minimum of 80% of the value of the assets in urban buildings must be leased for three years. For the rents received from other types of activities, the Socimis have to pay tax at a rate of 25%.

From now on, a tax rate of 15% will have to be paid on all of the profits not distributed by these types of entities.

“We need to discourage the promotion of these types of companies that promote the bubble model, undermine the public coffers and represent a grievance for competition. We consider that the special regime afforded to the Socimis, whose main feature involves a tax rate of 0% for Corporation Tax, needs to be reversed”, said Podemos in a recent document. It regards it as “necessary to reverse Government policy, based on forcing tax regulation to create a tax haven for companies that promote a new housing bubble”.

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Blackstone Publicly Criticises the Government’s Rental Housing Plan

13 November 2018 – Voz Pópuli

The company that has invested the most money in the Spanish real estate sector over the last five years, Blackstone, has publicly criticised the Government regarding its rental housing plan, which includes several measures that will directly impact the US company’s business in Spain.

Blackstone’s most senior representative in Spain, Claudio Boada, has warned that he views with “concern” the plans unveiled by Pedro Sánchez’s Government in this regard. Boada was speaking at a breakfast meeting this morning organised by the United States Chamber of Commerce in Spain (Amcham Spain) with the Minister for the Economy, Nadia Calviño, in attendance, at the Villa Magna Hotel in Madrid.

Claudio Boada, Senior Adviser at Blackstone for Spain and Portugal, was speaking after Calviño’s presentation, at a symposium led by Jaime Malet, President of Amcham Spain, and attended by more than fifty representatives of US companies in Spain. He warned that the US group regards with “concern” the plans unveiled by the Government for rental housing, and he pointed out that his company has invested €25 billion in the country in recent years “backing Spain during the worst years of the crisis”.

In particular, Boada referred to the project to return the duration of rental contracts to five years, versus their current duration of three years (as a result of the Urban Rental Law, dated June 2013), which will be applicable for physical persons. In those cases where the lessor is a legal entity, the minimum duration will be seven years.

The most senior representative of Blackstone in Spain, who attended the meeting together with Eduard Mendiluce, who leads the investment firm’s real estate business, requested channels of dialogue with the Minister for the Economy to address the matters.

The plan from the Government regarding rental homes affects the buoyancy of Blackstone’s core business in Spain. The company chaired by Stephen Schwarzman has been purchasing large packages of mortgages corresponding to more than 100,000 rental homes from Spanish banks over the last five years (…).

The group has taken advantage of the financial and real estate crisis to acquire those homes and mortgages at significant discounts, but it has taken the risk of making the operations profitable by trying to improve the management of those properties.

For Blackstone, whose motto is “buy, fix and sell”, its business involves renting out homes purchased at the most profitable prices possible taking into account the large discounts that it typically obtains upon acquisition. It also gets rid of tenants who do not pay their rent.

For this reason, the plans announced by the Government regarding rental homes affect the US group so much, given that far from making the rental sector more flexible, they would actually slow it down. Problem tenants, those who refuse to pay or leave a rental home, will presumably be given more time to dig their heels in (…).

Royal Decree on the horizon

“Blackstone has not threatened to stop investing in Spain”, said sources close to the investment company consulted by this newspaper at the end of the symposium organised by Amcham Spain. They added that the firm’s intention is very much to continue investing.

Nevertheless, the same sources indicated that Blackstone does require the possibility of entering into talks with the Administration to express its view regarding the rental policy, and that they believe that the Government will approve the new measures in this regard by Royal Decree this month. The company considers that there could be several alternatives reflected in the parliamentary procedure for the new regulation.

Original story: Voz Pópuli (by Alberto Ortín)

Translation: Carmel Drake

Sánchez’s Government Lets Socimis & Sicavs Off the Fiscal Hook Despite Podemos’s Efforts

16 October 2018 – El Independiente

The Government has managed to dodge two demands from Podemos that had raised concerns in the financial community: the taxation of Socimis and the conditions of Sicavs, the companies that wealthy fortunes use to manage their assets.

The Budget Plan for 2019 approved on Monday at the extraordinary council of ministers does not allude to these two vehicles, despite the contumacious struggle by the purple party to put an end to their benefits. In fact, the Government led by Pedro Sánchez and Podemos had signed an agreement for the budget plan for next year, which included modifications to the conditions of both companies, but, in the end, that has been ruled out.

The aforementioned agreement, published on 11 October, included increasing the tax on Socimis (…), which currently operate under a special tax regime for collective investment institutions (funds and Sicavs).

For the income obtained during the exercise of their main activity (rental and leasing of properties), Socimis pay tax at a rate of 0%. And for income that they receive from other types of activities, they pay tax at a rate of 25%.

The pact between the Executive and Podemos was going to mean applying a tax rate of 15% on the profits not distributed by those entities. In the end, that measure does not form part of the budget for 2019.

The other victory earned by Sánchez over Pablo Iglesias stars Sicavs. Both parties had agreed to tighten control over these vehicles to avoid their fraudulent use. In the end, they will be subject to the same supervision that has applied to them until now.

The agreement had involved granting the inspection bodies of the Tax Authorities the competence to declare, for exclusive tax purposes, the breach of the requirements established for the Sicavs in the financial legislation. In other words, it gave powers to the institution to ensure that the vehicles had, as required by that law, 100 genuine shareholders, to combat the typical practice whereby a single investor controls most of the capital (…).

Similarly, the Government and Podemos had reached an agreement to “establish additional requirements for application by the Sicavs of a reduced tax rate aimed at ensuring their nature as collective investment instruments, for example, the establishment of a maximum capital concentration in the hands of a single investor (including the stakes of related individuals and legal entities). However, that measure, although it may reduce the volume of capital that these entities receive, would objectify the collective nature of these investment vehicles, facilitating their regularisation by the Tax Agencies in the cases of fraudulent uses of Sicavs”.

Taxes on the banks

The entities that have, for the time being, not managed to free themselves from the tax blow are the banks. The Government wants the next budget to include a specific tax that targets financial transactions. The so-called Tobin tax has already met firm opposition from the banks and regulators, which warn of the risks that its implementation would have for the growth of the economy.

The Government’s forecast is that the proceeds raised from such a tax would reach €850 million, according to the Minister for Finance, María Jesús Montero (…).

Original story: El Independiente (by Ana Antón)

Translation: Carmel Drake

Government & Podemos Agree to Allow Town Halls to Regulate Rental Prices

11 October 2018 – Eje Prime

The Government has said yes to public control of the rental market in Spain. The Executive led by Pedro Sánchez (below left) has agreed to the regulation of rental prices by Town Halls, according to explanations provided in a Budget agreement reached on Thursday by the PSOE and Unidos Podemos. The measure is established provided its application is “temporary and exceptional” and is carried out only in those urban areas where there has previously been an “abusive increase” in rents.

Rent has formed the focus of the new Government’s action plan in terms of housing. In parallel to the regulation of prices, the Executive has announced that it will advocate the extension of the minimum term of lease contracts from three years to five, and, in those cases where the owner is a legal entity, the lengthening of the commitment between landlords and tenants to seven years. Moreover, the tacit renewal of contracts will be increased from one year to three, provided the intention to not renew the agreement is communicated by either of the two parties at least six months before it is due to terminate.

In addition, the PSOE and Unidos Podemos have agreed that damage deposits (fianzas) to enter rental flats will be capped at a maximum of two months and that the signing of bank guarantees will no longer be demandable by landlords. In the event that an owner wants to recover his home before the term agreed with the tenant, then that scenario must be formally explained in the contract in force.

More funding for the development of rental housing

The agreement, which will now have to be approved by Congress, includes a measure that supports the development of public housing. In the event that it receives the green light from the chamber, the Government will increase the housing budget for next year to €630 million. In 2020, it will increase that pot further still to €700 million and in 2021, to €1 billion. According to the text, in ten years, Spain will invest between 1% and 1.5% of its Gross Domestic Product (GDP) in public housing.

One of the objectives of the public housing plan is “to avoid “homes” from being sold to vulture funds or sold for a profit”, so as to ensure that “particularly vulnerable people” have the possibility of accessing a rental home.

Original story: Eje Prime

Translation: Carmel Drake