Tuesday, August 9

The new housing law and the upcoming destabilization of prices

The preliminary draft of the housing law approved by the Council of Ministers will not only affect the rental market, it will also affect the sale of new and second-hand homes due to the measures it establishes with respect to empty properties and the obligation to reserve the 30 percent of new promotions to public housing.

The rule indicates that municipalities can increase the property tax (IBI) to those homes that remain empty for more than two years without just cause and their owners own four or more properties in this situation.

This implies that, if in Madrid the average cost of the IBI is 660 euros, as calculated by the OCU, a person who has an empty house for two years would have to pay 1,320 euros for this tax.

In the event that an owner has four empty homes, the cost would reach 5,280 euros.

Sell ​​to get rid of the IBI

Given this increase, the owners of empty homes would choose to sell them, this would mean increasing the supply in the real estate market, he points out. Simone Colombelli, Director of Mortgages at iAhorro, which would entail “a drop in prices.”

Sources from the real estate portal Fotocasa consider that this “sanctioning” measure not only “will contribute to generating an unstable climate for the owners, but also raises the problem of how the municipalities will know which houses are empty.

They emphasize that it would be necessary to analyze the reason why the homes are unoccupied, since “it is likely that most of them need rehabilitation or new habitability certificates, so the State must stimulate the exit of this type of housing to the market through aid and bonuses ”.

This drop in prices would affect to a lesser extent cities such as Madrid and Barcelona, ​​where residential demand is very high, points out Colombelli.

More expensive new homes

The opposite effect will generate the law in newly built homes. Its price will rise, according to the experts.

This is due to the fact that one of the provisions contained in the draft law is that the promoters must compensate the buyers if they are late in the delivery times of the properties, a risk that will affect their price.

This less flexibility in delivery times “could increase the price, which will be higher or lower depending on the percentage of the penalty,” says Colombelli.

VPOs do not rent to promoters

To this is added that, according to the norm, 30 percent of the houses that are built must be destined to official protection housing (VPO) and, 15 percent of them will have to be directed to social rent.

Therefore, if a third of the real estate stock is allocated to social rental and VPO, the profits of the promoters will not be the same as those raised in the projects, which “could cause fewer constructions, a reduction in supply and , consequently, a price increase “, warns the director of Mortgages of iAhorro.

According to Fotocasa sources, this obligation is perceived as “legal insecurity” in the sector, which “will most likely keep investment away.”

The example of Catalonia

An example is what happened in Catalonia where this measure is already applied and more than half of the developers and builders have stopped their investment. In addition, 10 percent have transferred their real estate activity to those areas that do not establish this obligation.

The rise in prices predicted by real estate analysts is in addition to that experienced in the last 12 months for second-hand homes, which according to idealista.com stands at 4 percent, setting the price per square meter at 1,813 euros.

According Francisco Iñareta, spokesperson for Idealista, “there are many markets in which prices are higher than a year ago.”

“This situation has its origin in the strength of the demand that has reached record levels in recent months, the savings of families at historically high levels and mortgage loans with lower rates than ever.”