Property News from Spain

The Spanish property market in 2025 presents a dynamic mix of opportunities and challenges, marked by significant legal updates affecting rentals, evictions, taxes, and purchases. This article provides a comprehensive overview of these changes, empowering landlords, tenants, and buyers to make informed decisions.

Persistent Property Price Growth:

Despite government efforts to enhance affordability, the Spanish property market is projected to experience continued price increases throughout 2025. This surge is fueled by a persistent supply-demand imbalance, particularly in sought-after coastal regions where new construction lags. Consequently, prospective buyers are advised to act promptly to capitalize on current market conditions.

Rental Market Overhaul:

The rental sector has undergone substantial transformations in 2025, aiming to foster a more balanced and sustainable environment. Key changes include:

• Extended Contract Durations: Landlords can now offer rental agreements of up to five years, with tenants having the option for an additional five-year renewal. This measure promotes stability and reduces the frequency of contract renewals.
• New Rent Adjustment Index (IRAV): Effective January 1, 2025, the IRAV replaces the CPI for rent adjustments, capping increases at the lowest value among:
  • The previous year's annual CPI change.
  • The three-year average annual CPI change.
  • The five-year average annual CPI change.
  • This ensures more predictable rent adjustments, primarily for contracts signed after May 25, 2023, excluding temporary rentals and commercial properties.
• Shifted Financial Responsibilities: Landlords are now mandated to cover all costs associated with rental agreements, including estate agent fees and rent default insurance, easing the financial burden on tenants.
• Revised Definition of Large Property Owners: Regional governments can lower the threshold for large property owners to those with more than five properties in "tension zones," granting them greater regulatory control.
• Stricter Regulations in Stressed Rental Markets: Areas where rents or mortgage costs exceed 30% of household income or house price growth outpaces inflation are subject to enhanced controls to curb excessive rent increases.
• Tax Incentives for Landlords: Tax breaks are offered to landlords, including reductions in personal income tax on rental income, with higher reductions for renovated properties and rentals in stressed areas to specific demographics.

Taxation Updates:

• New Rubbish Tax: A nationwide rubbish tax will be implemented from April 2025, with responsibility for payment varying by locality.
• Changes to Property Tax (IBI) Rates: IBI rates are being adjusted across Spain, with increases in many cities and a decrease in Madrid. A surcharge of 150% will be applied to IBI on properties vacant for over two years, owned by people with at least four properties.
• Tourist Rental Regulations: New rules for tourist rentals require community approval, stricter regulations, higher taxes, and uncertain transferability of rental permissions, aiming to balance short-term and long-term rental availability.

Squatter and Eviction Laws:

• Fast-Track Squatter Evictions: A new law introduces a rapid trial process for squatter evictions, resolving cases within 15 days, with police intervention clarified, especially within the first 48 hours.
• General Evictions: General eviction processes remain governed by the 2023 Housing Law, with landlords advised to seek legal counsel for compliance.

Property Purchases in 2025:

• End of Golden Visa Program: The Golden Visa program, granting residency to non-EU citizens investing €500,000 in property, will end on April 3, 2025.
• Proposed Restrictions on Non-EU Buyers: A proposal is being considered to ban non-EU foreigners from buying property unless they or their families reside in Spain. This proposal is under debate, and regional governments may oppose it.
• Market Influences: Factors like interest rates, housing availability, economic growth, and population changes significantly impact property prices, despite potential restrictions on foreign buyers.

Key Considerations:

The 2025 changes reflect a commitment to housing affordability, tenant protection, and property owner rights. Landlords benefit from extended contracts and a new rental index, while tenants enjoy capped rent increases and enhanced protections. The fast-track squatter eviction process offers reassurance for property owners.

Staying informed and compliant with the latest regulations is crucial for navigating Spain's dynamic real estate market in 2025. Consulting with legal experts is advisable for personalized guidance.