It has long been clear that Airbnb investors in Spain would make it. Now they are feeling the backlash. In the space of two weeks, the cities of Palma, Malaga, Valencia and Barcelona have announced strict restrictions on short-term rentals (STRs).
The Spanish government has even said it is exploring a nationwide ban on the rental of tourist apartments in residential buildings.
These tough measures come against a backdrop of rising rents, increasing visitor numbers and fierce protests against mass tourism.
There are now more than 400,000 STR properties in Spain, according to industry analyst AirDNA. But that's down from the peak of 419,946 in 2019, the company's Bram Gallagher said.
"Unlike in France, where the number of offers has continued to explode, the restrictions in Spanish cities - as can be seen in Portugal - have had an impact: regulations make it more difficult [for property buyers] to justify the investment."
Despite this, the number of international buyers in Spain remains close to record levels in the first quarter of 2024, according to the latest government figures. Research by CaixaBank found that the average price difference between properties in tourist cities and other areas increased to more than 75% by the end of 2023, a record level.
Such investors are facing - and have helped fuel - rising prices in Spanish cities. The cities with the highest concentrations of STRs - including Madrid, Barcelona and Valencia - have all recorded rising property prices in the year to date, according to Idealista, a real estate company; in Malaga, prices have risen 19.6% in the past year.
There has been a wave of anti-tourism protests across Spain targeting unsustainable levels of mass tourism in cities and Airbnb rentals driving up local house prices. This activism appears to have pushed local councils to make these announcements, even though this is not solely the fault of tourism.
Rent controls are counterproductive
Barcelona, the largest recipient of international tourists in Spain, is leading the crackdown on Airbnb.
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In 2011, a licensing system for Airbnbs was introduced in Barcelona. According to AirDNA, there were already 18,000 mentions in 2018. Enforcement of illegally installed STRs was stepped up and a moratorium was imposed on new permits in the central areas (Ciutat Vella, Eixample, Gracia and Poble-Sec).
In 2021, it became the first European city to ban private room rentals of 31 days or less. The number of advertisements then dropped dramatically.
Mayor Jaume Collboni announced last week that he will completely abolish tourist apartments in the city by 2029. He said he would do this by not issuing new permits and not renewing existing permits.
The government hopes this will bring more than 10,000 short-term rentals back onto the housing market, reducing rental prices in the Catalan capital, which have risen 68% in the past decade, according to council data.
Still, restricting supply has driven occupancy rates to record highs - an average of 75% over the past two years - according to AirDNA, further encouraging investors (and many illegal rentals).
Mark Stucklin, of Barcelona-based analyst Spanish Property Insight, said: "According to the town hall, only 10,101 properties have a rental permit. The local press regularly reports on the practice of long-term tenants dividing their apartments into small rooms for STR subletting. It is very lucrative and landlords cannot evict them because they pay the rent."
The Spanish government has also recently introduced new rent controls to protect vulnerable tenants. But these have backfired in cities across Spain, causing many landlords to switch from long-term rentals to short- or medium-term rentals, making the rental housing shortage even more acute.
"The new rent controls make it virtually impossible to evict a tenant for non-payment and take away the ability of the landlord to negotiate rates, terms and contracts," Stucklin said.
Properties in Barcelona with an STR license have been sold for a premium of 10 to 15%, according to estate agent Lucas Fox, but with the possible ban looming - if the legislation is passed - this premium has certainly been reduced.
Mohammad Butt of Lucas Fox says: "Some property buyers who want to occupy a property themselves at some point are turning to medium-term rentals. The advantage over long-term rentals is that a tenant is not locked in for five or seven years; medium-term contracts are two to 11 months. There is a huge demand from digital nomads."
He says the potential net yield of 4.5% is achievable - the key areas for this are the same as the STRs, such as the Quadrat d'Or in the Eixample district, where two-bedroom properties are more in demand than one-bed properties for both types of rental.
'Stop the avalanche' of holiday homes
The rise of medium-term rental (also called seasonal or temporary rental) can also be seen in the city of Valencia. According to AirDNA, there are 9,490 STR ads there.
These listed properties must have their own entrances, and entire buildings cannot be converted into STRs in the old city centre or the trendy beachside neighbourhood of Cabanyal. But the lack of enforcement has seen STRs rise 15% since 2021.
In May, the Valencia Residents' Federation called for a moratorium on new tourist apartments to stop "the avalanche" of holiday rentals. The city council had closed 160 unlicensed holiday apartments and last week approved plans to tackle tourist housing in the historic centre.
Graham Hunt, of agent Valencia Property, says the city is full of guiri prisons (so-called 'foreigner prisons') - former shops and other ground floor properties that have been converted into Airbnb rentals with security bars on the windows. They maintain their status as commercial enterprises and circumvent the rules for 'residential' properties.
"Most people are looking for a rental investment. They call and ask about Airbnb rentals, but they're 10 years too late. But here, everything is rented, there's so much demand, no matter what type of rental you do," he says.
He estimates net returns at 5 to 9 percent for medium-term rentals, which are popular with digital nomads, students and house hunters. For three-month rentals, a typical rate is €70 to €80 per night for a two-bedroom apartment from €200,000 or €250,000 between the center and the sea.
The lack of long-term rental properties - for the same reasons as in Barcelona - has caused rates to rise, he adds, meaning rental prices do not match average local wages.
'Investors must change their mindset'
A lack of long-term rentals is an acute problem in the city of Malaga, where there are 7,282 STR listings, an increase of 18.5% since 2012. It is still possible to buy apartments that come with STR licenses, but the City council announced last week that new licenses will only be issued to homes with their own front door - most apartments are excluded.
"Investors need to change their mindset," says Savills' Jose Félix Pérez-Peña Garrido, who says buyers have bought apartments and sold them on after a year, sometimes making a profit of €100,000. It's no wonder house prices are skyrocketing.
"Medium-term rental is one option," he adds. "Many buyers think they want that [to invest in a] long-term rentals until they hear about the new regulations. Airbnb is blamed for locals' inability to find affordable apartments to rent, but it is only part of the housing problem."
In Madrid - where STR apartments must have a separate entrance - some buyers are also tapping into an embryonic luxury rental sector, says Ana White of Knight Frank.
"There is so much demand from students at the city's business schools and their families. Some try before they buy." Such apartments cost from around €1 million.
With the Balearic Islands now also facing moratoriums on STR licenses, Airbnb investment buyers should look to new areas with a shortage of tourist accommodation, says Bram Gallagher. He points to Vigo, Almeria and Pamplona as the three fastest growing areas for Airbnb listings - all up more than 57 percent since 2021.
In Vigo, in the increasingly popular Galicia, the average price for a two-bedroom apartment is €268,000, according to Kyero.com.
"I don't think we have reached the peak of Airbnb in Spain; we just see it spreading to other areas. It is politically expedient to restrict Airbnb, but a ban will not ultimately lead to a reduction in house prices." It also increases hotel prices, as seen in New York City, he says. Strict regulations in the city caused the number of STR advertisements to drop by 82% since August 2023. "It affects the choice of accommodation and affordability for tourists."