The supply of homes for sale has been significantly reduced in almost the entire coastal area of Barcelona, which has caused an increase in their prices despite the increase in financing costs experienced in the last 12 months.
Why does the fall in stock trigger the sale prices of housing on the coast of Barcelona?
The relationship between the fall in the stock market and the increase in the sale prices of homes on the coast of Barcelona may not be a direct and general relationship, since the factors that influence home prices are complex and can vary. depending on location and specific economic circumstances. However, there may be a few reasons why this could happen:
Safe haven: When investors perceive a decline in the stock market, they may look to safer investment alternatives, such as real estate. Property investment may be considered less volatile compared to the stock market, which could lead to increased demand for property in attractive areas such as the Barcelona coast.
Tourist attraction: Barcelona's coastline is a popular tourist area. If investors believe that investing in property in this area can generate stable income through rental to tourists, they may be willing to pay higher prices for properties, which in turn can increase sales prices.
Foreign demand: In many coastal regions, including the Barcelona coast, there is a high demand from foreign buyers looking for second homes or real estate investments. Fluctuations in international markets can influence the decision of these buyers to invest in properties on the coast, which could impact prices.
Shortage of supply: If the supply of properties on the Barcelona coast is limited and the demand remains high, prices may increase even if there is a decline in the stock market. The relationship between supply and demand plays a crucial role in determining housing prices.
Wealth effect: Although indirect, some homeowners on the Barcelona coast might experience an increase in their net worth if they have investments in the stock market. If these owners perceive a decline in the value of their stock investments, they may be more willing to spend on property or real estate to diversify their portfolio and maintain their level of wealth.
It is important to note that these are just a few possible explanations and that the relationship between the decline in stock and the sales prices of homes in a specific area may depend on a number of economic, social and market factors unique to that area in particular.
It is always advisable to consider multiple sources of information and perspectives when analyzing these situations.
Our financial department can advise you if you want to invest in a real estate asset on the Barcelona Coast.
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Real estate transactions of more than 3 million euros in Spain increased by 55% in 2022 compared to the previous year, a percentage that doubled that of 2019, before the pandemic, according to the 'Report on the Luxury Housing Market in Spain' .
According to a study by Hiscox, a company specializing in insurance for companies, professionals and high net worth, the luxury segment accounts for around 5% of the total residential market in the country and, despite the strong slowdown in the luxury residential market due to covid- 19, the evolution of the consumption trend of buyers in this segment is one of those responsible for the good health of the sector, which translated into a substantial increase in transactions in 2022, exceeding 8,000 operations.
By province, 85% of the homes with a value of more than 3 million euros were concentrated in Barcelona, Madrid, the Balearic Islands and Malaga. In addition, since 2019, the prices of these homes have increased between 10% and 20%, depending on the area.
Barcelona, the fourth spanish market, concentrated 6% of all buyers of luxury homes.
Malaga led this market, with a total of 2,500 luxury homes worth more than 3 million euros, representing 34% of the national total
The Balearic Islands was the second reference market, with 3,300 of these exclusive homes, 33% of the total for this market
Madrid was the third with 10% of the total 'stock' of luxury homes.
At the end of 2022, the average price in Barcelona was between 4.8 and 5.3 million euros, Malaga reached 5.9 million euros, while in Madrid the average was between 4.7 and 5.1 million euros.
Spain, fourth most attractive country for investors who buy luxury homes
The complex market for buying and selling luxury real estate is currently experiencing growth and more and more high net worth clients are choosing to invest in Spain.
The list of most attractive destinations for investment in these luxury homes worldwide is headed by the US, followed by the UK, Australia and, in fourth place, Spain.
If the main foreign buyers in this market are attended to, it can be deduced that Spain is chosen as a "safe investment and as an ideal destination" to establish a second residence for foreigners coming from the United Kingdom, Germany, France, Latin America, Russia and China , mainly, and prefer the coast.
The British remain the largest buyers of luxury homes
British investors continue to lead the share of transactions of these exclusive homes carried out by foreigners, with 20% of the total in 2022.
As for national buyers, it is the people of Madrid who most demand this type of home as their first residence, especially after the pandemic, due to the flexibility of remote work.
Summary New Spain housing law 2023
1 – Expansion of stressed areas in the rental market
"The conditions for the declaration of a stressed area are improved and facilitated, covering more areas for the application of control measures." The declaration of a neighborhood or a municipality as a "stressed area" will depend on each Autonomous Community, including the City Council of the municipality where these areas are being studied in the review.
For an area to be declared stressed, it must meet one of these two requirements: that its price has increased by more than 3 percentage points in the CPI value in the last 5 years or that the average home price exceeds 30% of the average income. from the area.
The determination of stressed areas may be from census districts such as micro zones and even areas as wide as entire Autonomous Communities.
To declare a stressed area for rent, at least one of these two conditions must be met:
- That the average cost of the mortgage or rent plus basic expenses and supplies exceeds 30% of the average household income
Example: if the average income in an area is 3,000 euros per household, the sum of the price of the home (mortgage or rent) plus utility costs cannot exceed 1,000 euros
- That the purchase or rental price of the home has increased at least 3 points above the CPI in the five years prior to the declaration of a stressed area.
Example: if a house cost 300,000 euros in January 2020, the CPI value would have increased in January 2023 between January 2020 and 2023 (12.9%) plus an additional 3 percentage points (15.9%). Thus, the house would have to be worth 347,700 euros.
2 – New definition for large holders
A distinction will be made between large and small owners.
- Large holders: will be those individuals or legal entities that own 5 or more homes in stressed areas or up to 10 homes (or 1,500 m2) in non-stressed areas.
- Small owners: they will be those individuals or legal entities that own less than 5 homes.
3 – Limit of the annual update of the rent eliminating the CPI
This is, without a doubt, one of the most controversial measures of the New Housing Law 2023, since there are many experts who have spoken out against this type of measure.
With the new regulations on rental prices, as of January 2024 (remember that currently the rental update is limited to a maximum of 2% as an extraordinary measure), rental updates will be limited to a maximum of 3% and will be decoupled from the CPI.
Rent updates will always be limited by an index: 2% in 2023, 3% in 2024 and a new rental price update index will be approved in 2025
In addition, it is expected that by January 2025 a new reference index will be created by which all rents will be updated and that it will be more stable and lower than the CPI. For now, the working group assigned for the law is working to define what this will be like. index by which the rentals will be governed.
4 –Regulation of rental prices in stressed areas
The rental prices of the new contracts, regardless of whether they are from large or small owners, will be regulated and capped. This measure is intended to contain and reduce the price of rental housing and will not be applied in areas NOT declared stressed.
This law also contemplates the inclusion of new rental homes on the market within these stressed areas, which will also be limited in price according to the powers of each Autonomous Community.
These limits will be established, depending on the type of contract and who is the owner (small or large holder).
- For small owners: by indexing to the previous rental price in force, that is, according to the rental price of the contract prior to the new rental contract.
Example: If a home had a rental contract for 1,000 euros per month, in the new contract the rental price may not exceed these 1,000 euros plus the increase corresponding to the current rate (2% in 2023, 3% in 2024 and to be defined). according to the new index from 2025) – Thus, if a new contract is made in 2023, its price may not exceed 1,030 euros per month.
- For large holders: by applying the price containment index, which is yet to be defined.
5 – Transfer to the landlord to pay the real estate fees
The new regulations contemplate in Section 1 of Article 20 that "The expenses of real estate management and those of formalization of the contract will be borne by the landlord".
The tenant will continue to pay the deposit and the additional guarantee when signing a new rental agreement.
6 – Prohibition of increasing the rental price with extra expenses
It is prohibited to increase the rental price by adding new expenses (community, garbage fee, etc.)
7 – Prohibition of “agreement between the parties” contrary to the Housing Law
The clauses that allowed the non-application of the measures contained in the Law if there was an agreement between the parties are eliminated. The Urban Leasing Law allows, as in any contract, the parties to reach agreements even if they are contrary to part of the Law.
However, as the draft indicates, "from a preponderant position of the owner over the tenant that usually occurs, the tenant could be forced to waive by contract the measures and rights contained in the Law to obtain the contract."
8 – New protection measures against evictions
This new regulation has several measures to achieve protection:
- Put an end to evictions without a predetermined date. Thus, it should be mandatory to establish a date and time to carry them out.
- New extensions are included in the launch procedures, which will postpone the processes for more than 2 years.
- Mandatory access to out-of-court settlement procedures for vulnerable people.
- The CCAAs will be able to articulate their own mediation and housing alternative mechanisms that they deem appropriate.
- The ability to use funds from state housing plans to offer housing alternatives for people at risk of eviction through subsidized social rents, rehousing people in vulnerable situations or any other policy is recognized.
9 – Tax benefits for owners
Small owners who have a home in an area declared stressed will receive tax incentives in the IRPF to put their home for rent and compensate for the fact that the price increase of the new rental contracts is limited in relation to the previous rental contract. .
For now, the details of the tax rebates have NOT been disclosed, although those of the old draft of the 2022 housing law proposed a rebate of up to 90% of the income obtained by the owners in the event that the rental price falls.
- 50% bonus to all those owners who rent their home.
- 70% discount: If it is rented for the first time to young people between 18 and 35 years old or If it is a new contract with improvements or rehabilitation
- 90% bonus if it occurs in stressed areas
A tenant (small holder) with a home in a stressed area that sets a rental price of €800/month and applies a 5% reduction on the rent up to €760/month could obtain a reduction of up to 90% of the benefit Net income tax. In this case, it is calculated that the net income would be €6,384, which if they are currently taxed at 60% (€3,830 would be taxed), with the new housing law this reduction would go up to 90%, so the amount subject to tax would be of €638.
10 – IBI surcharge for empty homes
More taxes for empty houses. To encourage the rental of these homes to those that have been empty for more than two years for owners with more than four homes in the same municipality, the Government will allow municipalities to increase the IBI rate for homes that are empty with a surcharge of up to 150%.
11 – Impossibility of changing the public housing qualification
Subsidized housing that is promoted on land whose destination is that of housing subject to some public protection regime will be subject to a permanent public protection regime that excludes disqualification, as long as the qualification of said land is maintained. In addition, the indefinite qualification of subsidized housing is established.
12 – Increase in the rental supply with the incentive affordable housing
In order to increase the supply of housing at prices appropriate to the economic situation of households in each territorial environment, the public powers, within the scope of their respective powers, may promote the existence of affordable housing with incentives, which will be subject, on a guidance and without prejudice to what is established in this regard by the competent administrations. - (c) 2023 Adevinta, in case you redistribute or disseminate our protected content, remember that you must quote us.
More information on the Ministry's website: https://www.lamoncloa.gob.es/serviciosdeprensa/notasprensa/transportes/Paginas/2023/170523-ley-derecho-vivienda-aprobacion-definitiva.aspx