Spain’s National Bureau of Statistics (INE) reported in April inflation hit 9.8% Year-Over-Year during March 2022 (up from 7.6% on the previous month). This is the highest figure in over 37 years, since 1985. It is a major source of concern.
In last month’s article (Renewing a tenancy in Spain: how to update your rental – 23rd March 2022) I discussed the huge impact a sharp rise in inflation would have in Spanish long term rentals if left unchecked.
In view of this spike in inflation, the Spanish Government has taken swift action and approved last week a batch of measures to fight it. Amongst them, is a law to enforce inflation control in all long-term rentals.
Starting on Friday 1st of April, and ending on the 30th of June 2022, the government will cap inflation rise on rental contracts over a 3-month period.
For professional landlords, the rise is capped at 2%. For laymen, there is freedom to negotiate. However, if no agreement is reached, a 2% limit will also apply. In practice, this will likewise translate into a 2% limit for laymen.
In principle, this measure is only ‘temporary’ and should last only for the next 3 months. However, in Spanish “temporary” is codeword for permanent. You can realistically expect the government to chain 3-month renewals on this measure whilst inflation remains high (this could be years).
This means landlords will be left powerless to pass on the sharp rise in inflation to their tenants via rental updates, as until now. In effect, landlords going forward will be ‘subsidising’ their tenants’ long term rentals on pocketing the inflation loss.
In view of this, landlords may remove their properties from long term lets (reducing supply) or destine them instead as holiday rentals (short-term rentals). This shortage in (long term) supply will translate into these lets becoming even more expensive than what they already are.
This is a prime example on how legislative consumer over protectionism (tenants) may backfire spectacularly affecting precisely the vulnerable collective which protection is sought by lawmakers. For every action there is a consequence, cause and effect.
Further reading from idealista:
- Termination of long-term lease agreements and ‘silent renewal’ – 10th April 2019
- Renting in Spain? Five clauses you should be mindful of – 7th May 2019
- Rental deposit scheme: how to get your deposit back – 16th May 2019
- Buy-to-let in Spain: landlord tax reliefs – 23rd May 2019
- How to formally end long-term lease agreements in Spain – 6th June 2019
- How to return the keys to your landlord – 2nd July 2019
- Top 10 mistakes on renting in Spain – 7th July 2020
- Top 8 illegal rental clauses in Spain – 21st July 2020
- Renting: be wary of signing ‘reservation’ contracts – 12th August 2020
- 8 tips to rent like a pro in Spain (Buy-to-Let) – 3rd February 2021
- Rental deposits in Spain: 1 or 2 months? – 29th March 2021
- Rental update in long term lets in Spain – 25th May 2021
- Are you renting? Do not forget to add a clause forbidding sublets! – 29th September 2021
- Renewing a tenancy in Spain: how to update your rental – 23rd March 2022