Las Palmas Property Faces Triple Whammy Of New Laws

Las Palmas Property: Analysis of the potential effects of new laws in 2024 and 2025

Las Palmas property prices have risen every quarter since Q4 2016. While the price in euros per square metre is still well below the peak of the previous boom, inflation has warped the market. Prices and rents in the province (Gran Canaria, Fuerteventura and Lanzarote) are now much higher when compared to people’s incomes because salaries in the Canary Islands haven’t risen.

Las Palmas Palmas property price rises

Locals once complained that property prices rose faster than they could save for a deposit. Now, they complain that they can’t even afford to rent. It is this, rather than widespread antipathy towards tourists, that drove the recent 20A protests across the Canary Islands.

Prices have risen for a number of reasons…

Inflation, a rising population, an almost complete lack of new social housing in the last 20 years, the rise of Viviendas Vacacionales, and property speculation by both locals and foreigners. There are also 200,000 empty properties in the Canary Islands, albeit many in rural areas suffering from depopulation.

There is an active and sometimes quite fractious debate about how to improve the situation for locals. Those on the left want active interference in the market. Things like a ban on holiday lets in residential areas, restrictions on non-resident property purchases, mortgage aid for young buyers, and a control on rising rents. Those on the right argue that supply will always be tight unless more affordable property is built. There has been very little social housing built in the last few years.

Las Palmas de Gran Canaria city definitely needs more affordable new property and fiscal incentives to encourage people to rent out empty homes. The debate about holiday lets is more nuanced.

There are over 40,000 registered holiday lets in the Canary Islands, concentrated in areas where everyone wants to live and stay. They have had an impact on property prices. However, they also create employment, spread tourist income in local areas, and bring new life to struggling rural areas. Getting rid of holiday lets completely hands the entire income from tourist stays directly to the hotels.

While inflation, rising rents and depressed household incomes are not a unique Canary Islands problem, they do have a bigger impact on a small place with limited space for new property. Local people have very legitimate concerns and new laws and rules will appear in 2024 and 2025.

There are already three new sets of Las Palmas Property laws due in 2024 and 2025.

The end of the Spanish Golden Visa Scheme

The first change is an end to the Residency Visa for property buyers who invest over 500,000 euros in Spanish property. This Investment or Golden Visa entitles the holder to Spanish residency and provides a pathway to Spanish and EU citizenship via residency.

The EU has been unhappy with Golden Visas for some time and Portugal is also abolishing its scheme. The move is widely popular amongst the Spanish public even though most Golden Visa holders invested in a single large property rather than in rental units for speculative purposes.

In Las Palmas, the Golden Visa scheme will have a minimal effect on property prices.

New, strict rules about Viviendas Vacacionales

The Canary Government recently released new draft rules about holiday lets. They are so restrictive that if they become law they make getting new VV licenses impossible. They would also doom all existing VVs to lose their license after a five-year grace period. Discussions are now taking place about amendments and there is some doubt about the legality of some of the new rules.

Once a final draft has been decided, it will likely become law in early 2025, triggering a long round of court cases, appeals and further uncertainty.

If a strict new law about VVs does come into effect, it will likely have unintended consequences here in Las Palmas city.Some VV properties will return to the residential rental market. However, many owners of holiday let properties, especially near the beach, don’t rely on the income from renting out their apartment. They will simply keep them empty when they are not in use. Others will change rental model and rent to nomads on shorter-term leases. Others will simply go back to renting out their property informally as they did before the VV concept was invented.

You have always been free to rent your property to family and friends. The VV rules only kick in when you  advertise your property on a holiday let portal.

If VVs disappear from Las Palmas, so will a lot of jobs (every VV is cleaned and maintained, every VV guest spends in local businesses) and it isn’t easy to see where replacements would come from.

The Ley de Vivienda 2023: Zones of tension and rental caps

The new Ley de Viviendas brought in by Spain’s centre-left government allows municipios to declare themselves a Zona Tensionada. This designation lasts for three years and can be extended annually provided the area still qualifies. In a Zona Tensionada, residential rents are capped (by a ratio calculated from catastral information about the property) and no new holiday let licenses are allowed. Storage rooms and parking garages are not included in the law which looks like a major loophole for landlords.

Specifically, a town hall can declare a zone of tension where either of the following is true…

  1. The average cost burden of the mortgage or rent in the personal budget or household’s living unit, plus basic expenses and supplies, exceeds 30% of the median income or median household income in that area.
  2. The purchase or rental price of the housing has experienced, in the previous five years, a cumulative growth percentage at least three percentage points above the cumulative growth percentage of the CPI of the corresponding autonomous community.

This could conceivably include large areas of Las Palmas where prices for both buying and renting property have risen substantially in the last few years. The Las Palmas Town Hall has already said that it expects to declare some areas of the city (as yet undefined) as zones of tension. However, the application process is long and complex so this is unlikely to happen until early in 2025.

The effects of the triple whammy on the Las Palmas property market

Taken individually, both the new VV and rental measures could act as a brake on rising Las Palmas property and rental prices. If VVs are no longer practical, some will return to the residential market. If rents are capped in zones of tension, rents will fall and property investors would look elsewhere for better yields.

However, if both come in at around the same time, the results are rather unpredictable and potentially damaging to the city’s property market and wider economy.

It is important to remember that most people who own a holiday let or a rental property are not big property investors or foreign investment banks. Instead they are local people who buy a second property and rent it out do it as a personal investment in their own future. This happens because the Spanish banks pay measly interest rates and most consumer investment products are complex and yield very little. Property has always been seen  as a safe investment.

However, if a de-facto ban on VVs and strict rental caps happen simultaneously, we could well see a crash in property prices in Las Palmas as VV and second-property owners decide to sell up. Last time that happened, there was a long recession.

Alternatively, Las Palmas landlords may decide to shut down their VVs and keep their rental properties empty betting that things will change after the next Spanish General Election.

Las Palmas property in 2024

So far, the Las Palmas market has not digested the potential implications of the rule changes. There is a widespread suspicion that they will get bogged down in political arguments and legal challenges . However, given the strength of feeling on display during the recent peaceful demonstration in the city (April 20, 2024), local politicians will have to be seen to act. There will be new rules and a lot of property owners won’t like them.

If you are planning to move to Las Palmas and buy a residence, the city remains an excellent place to settle down and live. This is what most of my buying clients here at Las Palmas Property plan to do. However, if you plan to buy a series of investment properties and rent them out for a high-yield, Las Palmas de Gran Canaria probably isn’t the place to do it right now.