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Barcelona Apartments

Rental Price Index for Barcelona Apartments Explained!

What is the Rental Price index?

You’re ready to invest in an apartment in Barcelona. You want to get your first property and start living on rental income (post: How to buy a house in Barcelona, a 10 step guide). Little did you know, that the Catalan government has added another difficult level for the average investor. 

Or you’ve bought a Barcelona Apartment some time ago, were enjoying a nice rental income, and are now suddenly faced with a change in the rules.

In September 2020 they approved a new law putting a cap on what the landlord may charge his future tenants. From now on, the maximum price chargeable per property will be dictated by the government using the Rental Price Index. This means you will no longer be able to decide on what to charge for your Barcelona Apartment.

Although this may not have been the smartest decision by the Catalan Government, we would love to take you through the new regulation. Explaining how to calculate the absolute maximum price on your investment.

This Post at a Glimpse

How to calculate the maximal rent for your Barcelona Apartment

The Catalan government made it quite simple.

You basically have to multiply the useful amount of square meters in your apartment by the rental price index. The government will only acknowledge one number as the “useful square meters” of your property. And this number only appears in your certificate of occupancy. Have a look at the image below. Your certificate of occupancy should look quite similar to this document.

certificate of occupancy

You now have your first number. 74 square meters.

Now it’s time to get the Rental Price Index for your property. Access the web of the Catalan Housing Agency and let’s input the rest of the data. First, the address. For our example, it is “Passeig de l’Ebre, 66, Tortosa”. Make sure that the web shows you your property on the map (otherwise it won’t work).

Now input the floor your flat is on, the construction year of the building, which letter appears on your energy certificate, the living area of your apartment (74m2), and finally the maintenance status. 

If you’re missing something like the construction year of the building, you can always look it up in the Spanish Cadastre

Once everything is filled out it should look something like the image below. Press “To Send” and you’ll get your Price Reference Index.

Rental Price Index Barcelona Apartments
Price Index Tortosa Barcelona Apartment

And you’re done. Your Price Rental Index for that property is 4,93€ per square meter.

Multiply your 74 square meters by the 4,93€ Price Index and this will give you your maximum allowed rent: 364,82€

The resulting price is normally relatively fair for the town, area and even street the property is located on. 364,82€ might seem like very little, but for a flat located within the small town of Tortosa this is actually close to market value.

The downsides

What the Rental Price Index doesn’t take into account makes this new regulation a bit unfair.

It doesn’t matter if your property has a huge terrace, a built in jacuzzi or is furnished with expensive designer items. You will still only be able to charge as much as your neighbor who maybe has his flat in ruins.

Since this problem might affect the rentability of your investment in a negative way, we’ve found a few ways to increase your maximum allowed rent within the legal frame of Catalunya.

How to increase your maximum allowed rent

There are several ways to increase your maximum allowed rent. 

a) Increase the maximum allowed rent up to 5% if your property has three or more of the following attributes:

  • Elevator
  • Parking space
  • The property is furnished
  • Air-conditioning or heating
  • A shared terrace or garden
  • A pool
  • Janitorial services
  • Special views (such as the sea, a forest, etc.)
 

b) Payment of community expenses and property taxes can be charged to the tenant directly. Until now these costs were normally covered by the landlord. But if the new regulation brings down your rental income significantly, you can reach an agreement with your tenant where he/she pays for those costs (these expenses have to be updated yearly)

c) If you’ve made renovations to the property during the contract of your tenant you may also increase his rent. These renovations will have to have improved his comfort, security, or energy efficiency. Only then will you be able to increase the rent freely after the first contract is finished.

d) If you’ve made improvements to the property’s comfort, security or energy efficiency up to one year before the contract starts you will be able to increase the rent as follows: Full amount of the renovation multiplied by 6% divided by 12 (dividing the result by the months of the year). Let’s say your renovation had a cost of 10.000€ multiplied by 6% = 600€ divided by 12 = 50€. This 50€ is the amount you can add to your rent. This rule has a catch dough. You can only increase your rent by a maximum of 20%, even if your renovation value is higher.

home office barcelona apartments

Short term rentals, no rent control

If you refuse to be controlled by the government on what you can charge your tenants, you could always make the switch and start renting out your property for short time periods.

If your rental contract has a duration in between 31 days and 11 months you will be able to charge as much as you want. This is only valid as long as the tenant does not use your property as his main home. Very useful for business trips, students, contractors, etc.

But like always there is a catch. If you decide to offer your Barcelona Apartment as a short-term rental, you won’t be able to take advantage of the 60% tax break the Catalan offers on gains made by long-term rental contracts.

Another area where rent control doesn’t apply is if you renting out a newly built property or a building that just went through a major renovation.

Our take on this

Government regulations in a free-market society haven’t worked in the past and will probably not work in the future.

This latest effort by the Catalan government has the aim to bring more affordable housing opportunities to the general public. By regulating the maximum allowed rent for Barcelona Apartments they want to avoid abusive landlords and provide an affordable home for everybody.

Although this sounds great in theory, what we at Property Management Barcelona have been noticing is quite the opposite. There has been a significant drop in rental property availability. Probably since most owners want to wait it out and hope for cancellation of this law, or because they have switched their properties to temporary rentals (30 days until 11 months where no regulation of maximum rentals exist). This means that the few properties available with enforced maximum rent will have increased demand by the general public, and will probably go to those with perfect job contracts and enough cash resources. After all this “change”, the segment of the population that was already struggling to find an apartment, will in all likelihood keep struggling.

Also, regulations like these, which come out of the blue, have a tendency of repelling real estate investors. Investors look for one thing above all else. Market stability. New regulations like these create uncertainty and distrust. Thanks to rental control, the rentability of housing developments might have dropped significantly or will look uncertain for the near future.

Those investors will then choose to take their money, resources, and job creation elsewhere. 

What's next?

We’d love to hear your thoughts on this subject. As an owner or a tenant, this new regulation has stirred up a lot of controversy in the Spanish Real Estate community. Please feel free to leave a comment with your view on this.

Also if you have any more questions or doubts shoot us a mail! We’d love to help you out.

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