New Government Housing Measures: What Impact Will They Have on Menorca?

The Spanish government has announced a series of measures aimed at regulating the real estate market, increasing the housing supply, and tackling speculation. This article examines the key aspects of these regulations and their impact on Menorca, an island with strong urban protection laws, a tourism-driven economy, and unique housing challenges.

Recently, the Spanish Prime Minister, Pedro Sánchez, announced a set of measures designed to strengthen the right to affordable housing in Spain. These initiatives are grouped into three main objectives: increasing housing availability, improving real estate market regulation, and providing greater support to citizens. Below are the proposed measures and their potential impact on Menorca.

Measures Announced by the Government:

1. Ban on property purchases by non-EU non-residents: The government plans to prohibit property acquisitions in Spain by non-EU citizens who do not reside in the country. This measure aims to curb real estate speculation and ensure more equitable access to housing for residents.
2. 100% tax on property purchases by non-residents: In addition to the ban, a tax equivalent to 100% of the property’s value will be proposed for purchases made by non-EU non-residents. This initiative seeks to discourage speculative investment in the Spanish real estate market.
3. 100% exemption on income tax for landlords reducing rental prices: A full exemption from the Personal Income Tax (IRPF) will be offered to landlords who lower their rental prices, aiming to encourage more affordable rents. It is estimated that 65% of landlords could benefit from this measure.
4. Creation of a public housing company: The government will establish a public entity responsible for managing over 3,300 properties and 2 million square meters, in order to increase the supply of affordable and social rentals.
5. Regulation and limitation of tourist rentals: Stricter regulations will be implemented to control tourist rentals, aiming to balance the market and prevent displacement of local residents due to rising prices.
6. Modification of the Public Sector Contracts Law: This law will be amended to facilitate the construction of affordable housing on publicly owned land, promoting public-private collaboration in the development of public housing.

Expected Impact of These Measures on Menorca:

Menorca, characterized by its island status, strict regulations on new construction, and a highly tourism-dependent economy, may experience various effects from these measures:

• Reduction in real estate speculation: The «ban» and tax on property purchases by non-EU non-residents could reduce speculative demand in Menorca. However, we do not believe this will have a significant impact, as this segment represents a small percentage of total buyers (most being national or EU residents). Therefore, this measure is unlikely to stabilize or reduce housing prices and still does not facilitate access to housing for local residents.
• Increase in affordable rental supply: The tax exemption for landlords who reduce rental prices could encourage Menorcan landlords to offer lower rents, thus increasing the availability of affordable housing on the island. However, some local real estate agencies have expressed concern that the new Housing Law could reduce rental supply due to a perceived lack of guarantees for landlords. When adding the overprotection of landlords against occupation issues, it is logical to assume that few owners will be attracted to put their properties up for residential rental.
  Menorca – Es diari
• Control of tourist rentals: Stricter regulation of tourist rentals could free up properties currently designated for this purpose, increasing the supply for residents and mitigating price hikes driven by tourist demand. However, it is important to maintain a balance so as not to negatively affect the tourism sector, a key pillar of Menorca’s economy. This, along with the previous point, may result in fewer owners willing to convert their properties into residential rentals.
• Facilitation of affordable housing construction: The amendment to the Public Sector Contracts Law could allow the use of public land in Menorca for the construction of affordable housing, increasing the housing supply and addressing the needs of the local population. This measure (increasing new construction in a sustainable and planned manner) could help gradually ease the housing tension for the local market, potentially controlling or reducing prices.

In summary, the measures proposed by the government have the potential to address some of the housing challenges in Menorca. However, the effectiveness of these initiatives will depend on their specific implementation and the collaboration between local and national authorities to adapt them to the island’s particular context.

If you’re thinking of buying or selling a property in Menorca and have questions about how these measures might influence the market, we’re here to help. Whether you’re wondering if it’s the right time to invest or sell, or simply need advice on the local real estate market, feel free to contact us. Our expert team will provide you with personalized service to answer all your questions.