Yahoo Finance The great Spanish Airbnb crackdown
The writing has long been on the wall for Airbnb investors in Spain. Now, they are feeling the backlash. In the space of a fortnight, the cities of Palma, Malaga, Valencia and Barcelona have clamped down on short-term rentals (STRs), announcing strict restrictions.
The Spanish government has even said it is looking into a countrywide ban on tourist apartment rentals in residential buildings.
These harsh measures come against a backdrop of rising rents, booming visitor numbers and fierce protests against mass tourism.
There are now more than 400,000 STR properties in Spain, according to the industry analyst AirDNA. But that is lower than its 2019 peak of 419,946, says Bram Gallagher of the firm.
“Unlike France, where listings have continued to explode, the restrictions in Spanish cities – as also seen in Portugal – has had an impact: the regulations make it harder [for property buyers] to justify the investment.”
Despite that, the number of international buyers in Spain in the first quarter of 2024 remains close to record levels, according to the latest government figures. CaixaBank research found that the average price gap between housing in tourist towns and other areas has widened to more than 75pc, a record level, in late 2023.
Such investors face – and have also helped fuel – rising prices in Spanish cities. The cities with the highest concentrations of STRs – including Madrid, Barcelona and Valencia – have all recorded rising property prices in the year to date, according to Idealista, a real estate firm; in Malaga, prices have shot up by 19.6pc in the last year.
There has been a spate of anti-tourism protests across Spain that have been targeting unsustainable levels of mass tourism in cities and Airbnb lets driving up local housing prices. This activism seems to have spurred city councils into making these announcements, although tourism levels are not solely to blame.
Rent controls backfiring
Barcelona, the biggest recipient of international tourists in Spain, has been leading the Airbnb crackdown.
A licensing system was introduced for Airbnbs in Barcelona back in 2011. By 2018, there were 18,000 listings, according to AirDNA, when stricter enforcement of illegally-listed STRs began, alongside a moratorium on new licences in central areas (Ciutat Vella, Eixample, Gracia, and Poble-Sec).
In 2021, it became the first European city to ban private room rentals of 31 days or less, and the number of listings nose-dived.
Last week, Mayor Jaume Collboni announced that he will completely get rid of tourist apartments in the city by 2029. He said he would do this by not issuing new licences and not renewing existing ones.
The government hopes this will bring over 10,000 short-term lets back onto the residential market, easing rental prices in the Catalan capital, which have risen by 68pc over the last decade, according to council data.
Yet restricting supply has driven up occupancy levels to record highs – an average of 75pc in the past two years – according to AirDNA, which has further encouraged investors (and many illegal rentals too).
Mark Stucklin, of Barcelona-based analyst Spanish Property Insight, says: “According to the town hall only 10,101 properties have rental licences. The practice of long-term rental tenants dividing up their apartments into tiny rooms for STR sub-lets is regularly reported in the local press. It is very lucrative, and landlords cannot evict them as they pay the rent.”
The Spanish government has also recently brought in new rental controls designed to protect vulnerable tenants. But these have backfired in cities across Spain, persuading many long-term let landlords to pivot to short or medium-term rentals, making the shortage of properties to rent even more acute.
“The new rent controls make it practically impossible to evict a tenant for non-payment and removes the landlord’s ability to negotiate rates, conditions and contracts,” says Stucklin.
Properties in Barcelona with a STR licence have been selling for a 10-15pc premium, according to agent Lucas Fox, but with the potential ban looming – if the legislation gets passed – this premium has surely been diminished.
Mohammad Butt, of Lucas Fox, says: “Some property buyers, who want to use a property themselves at some point, are turning to medium-term rentals. The advantage over long-term rentals is that a tenant is not locked in for five or seven years; medium-term contracts are from two to 11 months. There is huge demand from digital nomads.”
He says the potential net yield of 4.5pc is achievable – the prime areas for these are the same as the STRs, such as the Quadrat d’Or of Eixample district, with two-bedroom properties more in-demand than one-beds for both types of rental.
‘Stopping the avalanche’ of holiday lets
The rise of medium-term lets (also called seasonal or temporary lets) is also being seen in Valencia city, where there are 9,490 STR listings, according to AirDNA.
These listed properties must have their own entrances, and whole buildings cannot be converted into STRs in the city’s old town or fashionable beachside district of Cabanyal. But the lack of enforcement has allowed STRs to increase by 15pc since 2021.
In May, the Valencia Residents Federation requested a moratorium on new tourist apartments to “stop the avalanche” of holiday let properties. The city council had closed down 160 unlicensed holiday let apartments, and last week approved plans to crack down on tourist housing in the historic centre.
Graham Hunt, of agent Valencia Property, says the city is full of guiri gaols (so-called “foreigner prisons”) – former shops and other ground-floor premises that have been converted into Airbnb lets with security bars on the windows. They retain their status as commercial enterprises avoiding rules for ‘residential’ properties.
“Most people are looking for a rental investment. They ring up and ask about Airbnb lets but they are 10 years too late. But everything rents out here, there is such a demand, whichever type of rental you do,” he says.
He puts net yields at 5pc to 9pc for medium-term lets, which are popular with digital nomads, students and house hunters. For three-month rentals, a typical rate is €70 to €80 per night for a two-bedroom apartment costing €200,000 or €250,000 between the centre and the sea.
The lack of long-term rentals – for the same reasons as Barcelona – has pushed up rates, he adds, so rents are out of sync with average local wages.
‘Investors must change their mindset’
A lack of long-term rentals is an acute problem in Malaga city, where there are 7,282 STR listings, up 18.5pc since 2012. It’s still possible to buy apartments that come with STR licences, but the city council announced last week that new licences will only be issued to properties with their own front door – ruling out most apartments.
“Investors must change their mindset,” says Jose Félix Pérez-Peña Garrido, of Savills, who says that buyers have been purchasing flats and then flipping them after a year, sometimes making a €100,000 profit. It is no wonder that property prices are soaring.
“Medium-term lets are one possibility,” he adds. “Lots of buyers think they want [to invest in a] long-term rental until they hear about the new regulations. Airbnb is being blamed for the inability for locals to find affordable flats to rent, but it’s only part of the housing problem.”
In Madrid – where STR apartments must have separate entrances – some buyers are also tapping into an embryonic luxury rentals sector, says Ana White of Knight Frank.
“There’s such a demand from students at the city’s business schools and their families. Some are trying before they buy.” Such apartments cost from around €1m.
With moratoriums on STR licences in the Balearic Islands too, Airbnb investment buyers need to look to new areas where there is a shortage of tourist accommodation, says Bram Gallagher. He points to Vigo, Almeria and Pamplona, the top three fastest growth areas for Airbnb listings – all up over 57pc since 2021.
In Vigo, in the increasingly fashionable Galicia, the average price for a two-bedroom apartment is €268,000, according to Kyero.com.
“I don’t think we’ve reached peak Airbnb in Spain – we are just seeing it spread to other areas. It is politically expedient to limit Airbnb, but banning it doesn’t end up lowering house prices.” It also increases hotel prices, as seen in New York City, he says. Strict regulations in the city caused STR listings to plunge by 82pc since August 2023. “It affects accommodation choices and affordability for tourists.”
