Spain’s New Squatter Law and Evolving Property Market: What Investors Should Know

The Spanish government is finally addressing a major issue that has troubled property owners for years: squatters. New ‘anti-okupas’ laws aim to make it quicker and easier to evict illegal occupants while prioritising homeowners’ rights. Here’s a breakdown of what’s happening and what it means for property investments in Spain.

Key Changes to Spain’s New Squatter Law

The updated law is set to simplify and speed up the process of removing squatters. In the past, the system was slow and frustrating, often leaving property owners stuck for months. Now, faster legal proceedings will help owners regain control of their properties with less hassle.

This is particularly important in cities and coastal areas, where squatting has been on the rise as short-term rental properties grow in popularity.

The Proposed 100% Property Tax: More Talk Than Action?

The government also floated the idea of a 100% property tax on vacant homes, but Dylan Mitchell, CEO of Worldwide Property Co., sees it as more of a political move than a practical plan.

“This tax proposal doesn’t seem likely to go anywhere,” Dylan says. “Spain currently has a minority socialist government, so it would be very difficult for them to get 100% stamp duty for non-EU residents approved by the Spanish parliament. And even if it did get the approval, then each region would then need to agree to accept the new tax rate. This is unlikely as it would have a detrimental effect on the local tourism market and property market.”

Dylan also warns of the potential fallout if such a tax were enforced. “If the Spanish government continues this rhetoric they risk discouraging foreign investors, especially non-EU buyers, and push them toward countries like France, where policies are more welcoming. For example, France’s Para-Hotelier scheme allows investors to pay 0% Stamp Duty, to reclaim 20% VAT on the purchase price and tax-free rental income for up to 30 years on new-build properties that are available as short-term lets. This is idea for second homes that can be rented when the owners are not staying in the property.”

Insights from PwC on Short-Term Rentals in Spain

A recent report by PwC sheds light on the relationship between tourist lets and Spain’s rising rental prices. Contrary to popular belief, the report suggests that short-term rentals like those on Airbnb are not the primary driver of increasing rental costs. Instead, PwC points to other factors, such as limited housing supply and high demand in urban areas.

Key findings from the report:

Since 2015, rental prices in Spain have surged by 57%, driven by a widening gap between housing demand and supply. In 2023 alone, the formation of new households outpaced the construction of new homes by a ratio of 3 to 1.
In Ibiza, rental prices increased by nearly 20% while short-term rentals fell by 39% over the same period.
Madrid shows that short-term rentals account for less than 0.34% of the total housing stock, and the districts with the highest rent increases are not correlated with areas of high short-term rental activity.
Palma experienced a 27% rise in rental prices from 2020 to 2023, even as short-term rentals decreased by 37%.
Nearly 4 million homes in Spain are unoccupied, representing 14% of the country’s entire housing stock.
In Barcelona, even with a 56% reduction in short-term rentals from 2020 to 2023, rental prices surged by 24%.
Limited construction activity has failed to keep pace with population growth and urbanisation.

“This data challenges the narrative that short-term rentals are driving up housing costs,” says Dylan. “The real issue lies with long-term housing shortages, population growth, and a lack of new developments.” Over-regulating short-term rentals could harm tourism and discourage investment without addressing these deeper problems.

What This Means for Property Investors

Now is a great time for investors to capitalise on Spain’s evolving property market. Spain’s new squatter law reforms provide stronger protections for property owners, reducing risks and creating a more secure environment for managing investments.

While the proposed 100% property tax seems unlikely to move forward, it’s essential to stay aware of regional policy variations that could affect future investments. Acting now offers a chance to secure opportunities before potential regulatory changes are introduced.

Alternatively, investors looking beyond Spain could explore new-build properties in the French Riviera. This region offers competitive pricing, attractive tax incentives, and strong demand for short-term lets. Combined with a desirable Mediterranean lifestyle, it provides a compelling option for diversification in a thriving property market.

How We Can Help

We streamline the process of securing Spanish mortgages by presenting your application in the most efficient way possible and leveraging our network of trusted banks. This allows us to sometimes process financing in as little as 48 hours, giving you a critical edge in Spain’s competitive property market.

Contact us today to learn how we can support your investment journey in Spain.