Investor’s Notes: Spain – Where Renting is Harder and Risks Are Higher

There was a time when investing in Spain looked simple: buy an apartment by the sea, rent it out seasonally, and count the returns. But over the past two years, the landscape has shifted dramatically. Cities are introducing strict limits and moratoriums on short-term rentals, fines have climbed into the hundreds of thousands of euros, and taxes now require careful planning. Inflation, though moderate, still erodes net yields, while demand and prices behave unevenly across regions.

Restrictions and “semi-bans” on short-term rentals

Barcelona made global headlines by announcing that by 2028 it will phase out around 10,000 legal tourist rental licenses (VUT) and pressure platforms to remove illegal listings. This isn’t an instant ban, but the city has clearly set a course to scale back the sector.

Málaga, a key tourism hub, has frozen new VUT licenses citywide for three years to revise its urban planning rules. For investors, this effectively shuts the door to short-term formats in the city during the moratorium.

Seville has taken enforcement further: in 2024–2025, the city began cutting off water to apartments illegally rented to tourists. Spain also launched a national registry of short-term rentals, rejecting nearly half of summer applications (34,500 out of ~69,000). Legal risks vary by region: Spain’s Supreme Court overturned restrictions in Valencia, showing that local bans are vulnerable in court.

Heavy fines and neighborhood rules

On the Balearic Islands, illegal tourist rentals face fines between €40,000 and €400,000. In Catalonia, penalties can reach €600,000, and Barcelona has levied million-euro sanctions on shadow apartment networks.

Additionally, following 2024 Supreme Court rulings, homeowners’ associations can ban tourist rentals with a 3/5 majority vote. New rentals launched without approval risk lawsuits and administrative penalties — a major hurdle for the “buy-and-rent” strategy.

Taxes investors can’t ignore

Purchases: New builds incur 10% VAT plus stamp duty (AJD). Resales are subject to transfer tax (ITP), which varies by region (4%–11.5%).

Rental income: Non-residents pay IRNR at 19% (EU/EEA/Norway/Iceland) or 24% (others), on top of expenses.

Proposals: The ruling party has floated raising VAT on short-term rentals to 21% and introducing extra taxes on foreign buyers.

Inflation and margins

Spain’s inflation stood at 2.7% YoY in August 2025 (core 2.4%). If gross yields are 4–5%, inflation alone can shrink real margins to near-zero after taxes and expenses.

Prices, demand, and uneven growth

Nationally, home prices surged 12.7% YoY in Q2 2025, the highest in 18 years. Yet transaction volumes showed the first drop since March 2024, and some local markets already show stagnation. The end of the Golden Visa program in April 2025 also cooled premium demand, especially in Barcelona, Madrid, and coastal areas.

Occupation (Ocupación) as a legal and reputational risk

Illegal squatting remains a sensitive issue, with thousands of cases annually. Regions are setting up “anti-ocupación” offices and courts are refining eviction procedures, but risks of downtime and costs remain, especially for unmanaged properties.

Migration, protests, and political volatility

Record migration flows to the Canary Islands and nationwide protests against “touristification” are pushing cities to tighten rental rules. Investors face regulatory volatility directly tied to shifting political winds.

Key takeaways for foreign investors

Strategy: Pure short-term rentals are the riskiest. Consider medium-term, co-living, or long-term contracts.

Licenses: Check for moratoriums (e.g., Málaga), license expiry risks (Barcelona 2028), or court challenges (Valencia).

Taxes: Factor in VAT/ITP, AJD, IRNR, IBI, inflation. Prepare for possible VAT hikes on tourist rentals.

Yields: With inflation at ~2.7% and home prices up 10–13% annually, entry is pricier and net yields shrink.

Compliance: Professional management, insurance, and legal checks are essential. Fines of €100k+ make “DIY Airbnb” a costly gamble.

Bottom line: Spain remains a liquid real estate market, but short-term rental strategies now require legal, tax, and compliance frameworks. Treated correctly, Spanish property can still work in a portfolio — but no longer as an easy passive “beach apartment.”