REITs might be the solution for housing rental in Spain

REITs might be the solution for housing rental in Spain

This was one of the conclusions drawn from the study "Evolución reciente de las socimi en España" (Recent REIT evolution in Spain), from Banco de España to which El Economista had access and which shows the housing segment has increased its weight every year in terms of REIT investment, particularly within the large metropolitan areas. For Banco de España, «this evolution could favour an increase in housing rental offer in the coming years, which could contribute to mitigate the pricing increase dynamic which took place recently within this market, connected to a strong increase in terms of demand».

This is a problem that has already been identified by the Government, which is planning to establish the limitation or the reduction of housing rental prices in stressed market areas, both for new contracts and for already existing ones. But this is one measure that is not being looked at favourably by the market. Beatriz Toribio, general manager at the Asociación de Propietarios de Viviendas en Alquiler (Association of Rental Housing Owners)- ASVAL, alerted for the fact that this regulation, which will be included in the next Housing Law, «does not fix the structural problem which affects the segment in Spain: the lack of housing rental offer, especially affordable housing rental. It also represents a heavy blow on the legal safety of the market operators and most of the families and it will affect future investments in the housing market», she added.

REITs offer advantages for investors

Besides having the housing rental market under their sights, Spanish REITs also offer several advantages to investors, such as risk diversification, professional management and business scalability.

Nevertheless, it should be recalled that the REIT regime is being reviewed by the Spanish Government which intends to change the REITs’ minimum taxation, increasing it from 0% to 15% over retained earnings. Despite the «limited» tax impact, since by law these companies have to distribute at least 80% of their earnings amongst their shareholders, this measure has also alerted investors who seek legal stability.

Asocimi’s president Javier Basagoiti declared that «regardless of the impact the 15% tax over retained earnings on REITs may have, any legal change that does not aim to improve the competitive position of our REITs against the competition of other European countries would be negatively interpreted by investors who bet on our real estate sector since it generates legal and institutional insecurity».

Jesús González Nieto, BME Growth’s managing director, assumed that this regime «is not an exotic product we came up with in Spain, it’s a vehicle similar to other vehicles which exist around us. It would be convenient to change it as little as possible». 

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