Credits: Pool Moncloa/ Borja Puig de la Bellacasa
Prime minister Pedro Sanchéz and vice-prime minister Pablo Iglesias also announced, as part of the 2021 Spanish State Budget, that the REITs’ minimum taxation will increase from 0% to 15% over retained earnings. The tax impact of this measure is limited since by law these companies have to distribute at least 80% of its earnings amongst their shareholders and many of them go well beyond that amount. A different thing is how this measure will be perceived by international investors.
In that sense, Javier Basagoiti, Asocimi’s president 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». Basagoiti added that «the strategic and long-term investment characteristics of the REIT business demands a stable and safe legal framework which generates trust so as to guarantee that the capital flows keep reaching our country and that the sector’s companies can have the solvency to move forward with their business plans, thus complying with their obligations towards all their stakeholders, including the Public Administration itself».
Rental prices limitation
The two parties which form the government coalition have agreed to present, within four months, before Congress, the law which will establish the limitation or the reduction of housing rental prices in stressed market areas, both in new contracts and in already existing ones. The measure will be part of the new Housing Law and should be approved by the cabinet, according to the agreement, in a maximum of three months so that it can be presented before Congress before the coming month of March.
For Beatriz Toribio, general manager of the Asociación de Propietarios de Viviendas en Alquiler (Association of Rental Housing Owners)- ASVAL, the agreement between the two parties which form the Government to implement a regulation on housing rental prices is bad news for the market. «This type of regulation will have the opposite effect of what is desired: it will decrease the offer of rental housing and it will obstruct access to rental housing for social groups with fewer resources, but it makes sense within the current economic crisis. We can already see prices dropping in the markets, something that needs to be regulated now», assured Toribio, who further added that the «the regulation announced today and 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, most of the families and it will affect future investments in the housing market».