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Investment climate

What is the general climate of real estate investment in your jurisdiction?

In general terms, the real estate investment climate has been very positive since 2014. Investment hit record highs in 2015 and 2017, due to the entry of international investment funds and increased activity by Spanish real estate investment trusts. In 2016 there was a slight dip, although investments in non-residential assets nonetheless amounted to about €9 billion that year. The forecasts suggest that the Spanish real estate sector will remain one of the most attractive in the Eurozone, and for 2018, experts place expectations for growth above the European average. The most relevant markets are the office market, the logistics sector and investment in shopping centres. Madrid and Barcelona are the most attractive cities for real estate investors due to opportunities for development, refurbishment and the increase in rent. Additionally, investments in student and elderly residences and hotels are becoming more significant.


Who are the most common investors in real estate?

The most common real estate investors in the Spanish market are property investors and international investment funds. Investors mainly focus on the office, retail and logistics sectors ‒ sectors that have a significant impact on the real estate market and that have seen increasing demand since 2014. In 2016, 2017 and 2018, the number of transactions made by Spanish real estate investment funds (SOCIMI) has increased considerably.

Are there any restrictions on foreign investment in real estate?

Spain has enshrined the principles of freedom of establishment and non-discrimination, and there are thus no legal restrictions to foreign investment. Nonetheless, special zones of interest for national security reasons may require express authorisation; this may be the case in coastal areas and islands where foreign property ownership can be limited to a certain percentage.

Since 1999 transactions are considered foreign investments only if the amount involved exceeds 3,005,060.52. In such cases, a simple retroactive notice to the government is required in order to satisfy governmental formalities. On the other hand, there is a formal obligation to report any investments that originate in so-called ‘tax havens’ prior to carrying out the investment. Together with the current anti-money laundering legislation, a considerable amount of information is requested from foreign investors. The rules on investment are always linked to the place of origin of the investment, rather than to nationality. EU citizens are exceptions to this rule.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

As a general rule, foreign investors invest in the Spanish real estate market through direct investment. However, a significant number also invest through investments funds, real estate investment trusts or partnerships in a Spanish corporation. In 2016, 2017 and 2018, the number of transactions made by real estate investment funds has increased considerably.

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