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Property in Spain: price rises, rural homes struggle and plusvalía dates

Stay up-to-date on the latest Spanish property news with The Local's weekly roundup. This week we cover the Bank of Spain's warning of property price rises, when the new plusvalía capital gains tax comes into force and how getting a good deal on a rural home is harder than it once was.

Finding a well-priced and suitable house in rural Spain is not as easy as it once was. Photo: 12019/Pixabay
Finding a well-priced and suitable house in rural Spain is not as easy as it once was. Photo: 12019/Pixabay

Bank of Spain warns of possible price rises

The Bank of Spain has warned of rising prices in the property market due to lack of properties and increases in building costs.

Although the Bank doesn’t see warning signs of property overvaluation or crisis in the real estate market now,  it has warned that prices are rising and that they could rise further still due to increasing labour and supply costs.

Property sales have rebounded since the pandemic, up 14 percent during the first eight months of the year compared to the same period in 2019, but the bank did also warn that the Spanish property market may struggle to absorb the increase in demand due to the lack of properties and increased cost of construction.

The uptick in purchases in 2021 has led to a year-on-year price increase of 3.3 percent in the second quarter, in both new build and second-hand purchases, and changing property preferences in the post-pandemic world are also contributing to increasing demand, with many families emerging from the pandemic seeking single-family homes as opposed to living in apartment blocks.

Good deals on rural homes in Spain tough to find

For many property buyers in Spain, buying a house in a rural area of the country has long been thought of as a cheaper option. The rise in remote working during the pandemic has also meant that many young families are choosing to swap city for village life.

But according to a recent Red Cross report ‘Depopulated Spain’, buying property and escaping to the country is no longer as easy, or as cheap, as it once was.

One problem is the number of empty houses owned by people who don’t want to sell, which pushes up prices, as does rural tourism. According to the Red Cross report rural tourism has even forced some to live in houses Monday to Friday and then vacate the property for the weekend as it has been rented to tourists.

Similarly, the pandemic has also contributed to an increase in prices. After so long cooped up inside, many buyers are now seeking property with more space, or second homes to be able to escape to in the case of further lockdowns and travel restrictions.


Rental allowance not for big spenders

Young people who pay exorbitant rents will not be able to access the housing voucher scheme that offers monthly reductions of up to €250 a month. Sources at the Ministry of Transport confirmed to ABC that there will be a price cap on the scheme after there was an ‘avalanche’ of applications following Prime Minister Pedro Sanchez’s announcement.

The price cap will not only be on annual income as proposed – €23,725 a year – but also on monthly rent itself. The rent limit itself has not yet been confirmed, but it is believed to be around €1,000 a month and will ultimately be decided by the autonomous communities. 

Claimants for the housing voucher will have to present a rental contract to qualify, although the identity of claimants will be kept confidential from landlords in order to stop a spike in prices and taking advantage of the subsidy. 

It is believed the government intends for the scheme to start from January 1st of 2022, if approved by the Council of Ministers, and they have already put aside €200 million in the budget to support the autonomous communities.

When will new plusvalía tax changes come into force?

On Monday November 8th, Spain’s Council of Ministers approved a new version of this municipal capital gains tax after the previous version was declared unconstitutional by Spain’s Supreme Court.

Plusvalía is a land tax paid by homeowners and buyers to Spanish town halls on properties that are sold, donated or inherited. 

Simply put, it taxes the increase in value of land during the duration of ownership from purchase to sale, but tax halls were charging even if there wasn’t a rise in value.

The seller (or donator, in some cases) pays the plusvalía, which varies between regions and municipalities, and normally has to be paid within 30 days of the property transferring hands. You can read about it in detail in the link below. 

READ MORE: Plusvalía – The changes to Spain’s property tax that home owners should know about

So are the new plusvalía rules already applicable? Well, the Royal Decree Law came into force on Wednesday November 10th. Within a month, the legislation must be validated in Spain’s Congress where it can be decided if it passes as a law, but that doesn’t prevent if from being valid until then. 

Town halls across Spain have six months to apply these changes to their municipal laws but even if they don’t do this soon, it appears that the plusvalía laws are already in force or will be at the latest by December 10th. 

Germans outnumber Brits as biggest foreign buyers

After a long run Britons are officially no longer the biggest property buyers in Spain. 

Germans have overtaken Britons as the main foreign property buyers, accounting for 10.42 percent of purchases in the third quarter of 2021, slightly ahead of British buyers at 9.82 percent and French at 7.82 percent, according to statistics from Spain’s national property registry.

In 2010, Britons accounted for a massive 35 percent of the total, but Brexit may not be the only reason for this slump, and there is no ‘mass exodus’ of Brits from Spain’s Costas as the British tabloids may suggest. 

The 90-day limit that applies to non-resident second home owners is likely having an impact, as is the ageing demographic of homeowners who bought property in Spain during the boom years of the early-2000’s.

Article by Conor Faulkner

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How to turn a bar, office or shop into a residential property in Spain

Commercial properties in Spain can be a lot cheaper than residential ones, but it’s not as straightforward as buying a former restaurant, office or shop and moving in. Here are the steps to follow and what you need to be aware of.

How to turn a bar, office or shop into a residential property in Spain

One of the tricks budget property hunters in Spain have been using in recent years is buying a local (commercial property), oficina (office) or nave (industrial unit) and transforming it into a vivienda (residential property) to live in or let out. 

It’s a trend that’s roughly doubled in big cities such as Madrid and Barcelona in the last five years. 

Buying a commercial property can work out to be 50 percent cheaper than a flat or house in Spain and there can be other advantages such as it being more open plan than Spain’s typical corridor-themed apartments as well having more money to invest in the renovation. 

Is it possible to turn a commercial property into a residential property in Spain?

Yes, in theory it is, but it’s not always possible. The rules relating to a change of property’s usage from commercial to residential or vice versa are determined by each municipality in Spain, so before you rush to buy un local, you have to do your homework first and be aware of some of the most common pitfalls.

It could be that the limit of residential properties per hectare has been surpassed already, or that without some major changes the property doesn’t meet the standards of size, rooms, space, height, layout, ventilation, air extraction or light of the town or city hall. 

It isn’t the most straightforward process and depending on the property and the individual municipal rules in place, it might just not be possible to live in the property or rent it out to others.

Living in a commercial property is illegal and may cause you problems such as not being able to activate water and electricity or register your padrón at the town hall.

Despite all the paperwork needed, flipping a bar or office and turning it into a home usually works out cheaper than buying a residential property in Spain. (Photo by ANDER GILLENEA / AFP)

Don’t be discouraged however, as in many cases it is possible to change the use of a property from commercial to residential and in regions such as Galicia authorities are currently facilitating the process to address the matter of empty abandoned stores and the lack of well-priced accommodation for young homeowners.

What are the steps to follow in Spain to change a property from commercial to residential?

Check the statutes of the community of owners: In order to make any changes within the community of neighbours, permission must be requested in advance. Beforehand, you can ask the comunidad president for a copy of the community statutes to see if the change of use from commercial to residential is mentioned.

READ ALSO: ‘La comunidad’ -What property owners in Spain need to know about homeowners’ associations

Request permission from the town hall: After getting the green light from la comunidad, you have to go to the ayuntamiento (town hall) of the town where the property is to find out if it’s possible to add another residential property to the finca (building). 

Even if this is confirmed, it doesn’t certify that the change of usage from commercial to residential is allowed, for which the town hall will ask you to provide an architect’s proyecto técnico or feasibility report based on municipal urban laws. You will only be allowed to swap from commercial to residential if the project meets the safety and habitability requirements of the Technical Building Code (Código Técnico de la Edificación).

Get the Building Licence: Known as licencia urbanística or permiso de construcción in Spanish, this is an official document required by the town hall for you to carry out a construction or renovation project. In other words, you’ll need this municipal authorisation to begin work on your future residential property, whether it’s major work or minor . 

Get the Certificate of Habitability: Once the renovation work is complete, you’ll need the cédula de habitabilidad to be able to move in or let the property out . The conditions for this are regulated by each regional government and again it’s an architect who must prepare a technical report in order for a town council technician to issue the certificate of habitability.

The certificate we need for the change of use is that of primera ocupación (first residential occupation), which has to include the usable surface area of ​​the home, rooms, address, location, maximum inhabitants etc.

How much does it cost to transform a commercial property into a residential one in Spain?

If for example it’s a 80m2 property with two rooms, the total would be about €50,000, according to property websites Idealista and Habitissimo, with the bulk covering renovation costs (€500/m2= €40,000) and the rest going to cover permits, architecture costs and taxes.