By reforming rental property laws, in the next few months Spain will be trying a new tactic to help landlords with their buy-to-let properties, due to a shocking 40% drop in house prices during the past few years, a similar crisis to what the UK is currently witnessing.
Because of this, prospective homebuyers who want to find a place to live can’t, as they are struggling with raising money for mortgages from the country’s troubled banks.
Spain has roughly 24 million homes which are privately-owned, with just under 2 million of those properties buy to let.
The Spanish government has come up with new laws for landlords to help support them, by giving tenants who face eviction, over a week to resolve rent arrears.
Buy to let landlords can receive tax relief
Just like the UK’s assured shorthold tenancy agreements, the Spanish new laws will allow landlords to attain possessorship of their properties after a 60 day notice.
Originally, tenants could legally live within a property for 5 years with an additional 3 years if the landlord wanted to extend the contract. However, new changes have been made so the updated term will run for 3 years with an additional year if the landlord agrees to it.
To help boost financial support from foreign investors, if the properties are leased to anyone who is under the age of 30, who are not eligible for housing benefit from the governments, they will offer buy to let landlords’ significant tax relief on rental income ranging from 60% to 100%.
The recent rent legislations that tie yearly increases to the percentage of inflation, will be replaced by new rules that will come back to the arrangements made between the tenants and their landlords. This is another option to which the UK government is looking into to enforce within the new rules.
Due to the absence of leased homes, the government sees this as a damaging effect to employment by slowing down the mobility within the workforce as the jobless won’t be able to sell their properties and buy a new household to help find work.
UK sees 5% rise in buy to let properties
According to a worldwide rental housing guide from cosmopolitan advisors, Knight Frank, during the second quarter of 2012, properties have declined in value with figures showing a 2.5% drop and an 8.3% YOY (year-on-year). They have been tracking various countries housing market performance throughout the world and Spain has resulted in being the fourth worst.
The UK has seen a similar occurrence with property values declining, however The Council of Mortgage Lenders (CML) have revealed that lending for buy to let properties have risen by 5% during April to June of this year, with forecasts of potential growth throughout the next couple of months.
They stated that by the end of the second quarter of this year, there had been 1,415,500 BTL mortgages with a total value of £160.7 billion. That’s an impressive 12.8% of all mortgage balances in the UK.
On a positive note, in correlation to the first quarter, the second quarter has seen an increase of 15.6% because of low household prices in Spain.
March sees highest sales records thanks to Stamp Duty return
During April to June 2012, Spain saw roughly 80,000 completed sales which resulted in a 11.6% drop compared to the same months of last year, therefore taking the overall amount of completed transactions to 333,562 during the course of 12 months.
Unfortunately figures for the same time period within the UK in regards to completed house sales have not yet been released. However, according to the Land Registry, since January to April the UK has seen 188,969 sales in total with March recording the highest sales due to the return of stamp duty.