Increase in Spain's Rental Market to Solve Property Surplus

In further economic debate primarily related to the Spanish property industry, the adoption of a draft Sustainable Economy Act has been discussed. And perhaps the most repeated comment heard was "things are heading in the right direction", although most with the caveat of "it is not sufficient." The adjustment in the housing sector has also been taken into account in developing some of the measures proposed under the new legislation. Improving the tax allowance for landlords from rental income and allowing the purchase of property to be taken into consideration with regards to income tax are applauded by most experts, who foresee the possibility of renting out much of the current stock of unsold property.

"Given the history of our country, perhaps we will never achieve the rental rates of countries like France or Germany, but we should aim to have a 15% rate and remain at that level," he said Caixa Catalunya’s Eduard Mendiluce. These new incentives will also make lease purchasing more attractive. Furthermore, the creation of a new tax deduction for renovation work to promote energy efficiency and accessibility for the disabled has also been welcomed by the construction sector. The National Construction Confederation (CNC), which comprises of the main industry associations, have been asking for months for action to promote this tax deduction to counteract the residential building slowdown and welcomed the adoption of reduced rate of VAT (7%) for these projects.

Despite the reduction in building, and although all the statistics show a great deal of price cuts, the study says that, even today, 40% of families that would potentially buy a house could not cope with current average prices, they are effectively excluded from the market. So what is the future outlook? Demographics will be crucial for two reasons; the first is that the need for a first home by those born in the baby boom and the second is that an influx of immigrants is not expected. Therefore, the study does not expect a demand for new properties of more than 220,000 annually. With an estimated current surplus of between 640,000 and 1 million homes that would mean at least 3 years before a complete recovery is made in Spain.