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Spain to raise minimum wage by 8 percent in 2017

Spain's minority conservative government on Friday approved raising the country's minimum monthly wage by 8.0 percent in 2017 to €825.5 ($876) as demanded by the main opposition Socialists.

Published: 2 December 2016 16:32 CET

Spain to raise minimum wage by 8 percent in 2017

Photo: Images Money/Flickr

Finance Minister Cristobal Montoro said the rise – approved at a weekly cabinet meeting – was “negotiated with other political groups”.

The minimum wage will rise from €764.4 to €825.5, an increase of €61.1.

That is higher than the monthly minimum wage of 618 euros in neighbouring Portugal but far lower than the minimum wage of €1,467 in France.

Prime Minister Mariano Rajoy was sworn in for a second term last month but this time around his Popular Party lacks a majority in parliament and needs to scrabble for approval from other opposition parties further to the left to win approval in parliament for legislation.

The Socialists had demanded a rise in the minimum wage to back the government's budget for 2017, which will need to include measures to reduce public deficit targets agreed with the European Union.

“We secured from the government a rise (in the minimum wage) of eight percent,” Socialist party spokesman Rafael Hernando told reporters, adding “this increase is the largest in 30 years”.

Hernando said the rise was an “indispensible condition” for the party's support for the 2017 budget.

Spain has agreed with Brussels to reduce its budget shortfall to 3.1 percent in 2017 from 4.6 percent this year.

Spain's two biggest unions, the UGT and CCOO, welcomed the increase but said it was “insufficient”.

Over 5.5 million Spaniards earn the monthly minimum wage, or an even lower salary, and “struggle to make ends meet”, they said in a joint statement.

The two unions will stage two days of protests across Spain on December 15th and 18th to pressure the government to drop its austerity policies and “respond to social needs”.

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Is buying a property to rent out to tourists in Spain too risky now?

Regardless of what you think are the causes of Spain’s housing crisis, one thing is clear: short-term holiday lets are up to four times more profitable than long-term rentals.

Just how remunerative they are can depend on many factors (occupancy rate, location etc), but according to Spanish property portal Housfy, a tourist let provides an average net profit of 15 percent a year.

With this in mind, it’s no surprise that tourist apartments have proliferated across the country: 9.2 percent alone in the last year, which adds up to around 60,000 new ones.

As Spain welcomes more and more tourists (84 million in 2023, a record that looks set to be beaten in 2024), you’d expect the goose that laid the golden eggs to continue plugging away.

However, the simmering resentment from disgruntled residents who blame mass tourism and holiday lets for their spiralling rents does appear to be having an impact.

OPINION: Spaniards should blame landlords, not tourists

There is currently no outright nationwide ban in Spain on Airbnb-style lets, but a growing number of small towns and big cities have taken action in recent weeks and months.

From Dénia on the Costa Blanca to Pamplona in the north, municipalities across Spain are introducing temporary moratoriums on new licences for tourism apartments, which should in theory prevent new ones from popping up (there are tens of thousands of unlicensed holiday lets, especially in Madrid).

READ ALSO: Which cities in Spain have new restrictions on tourist rentals?

Barcelona authorities have perhaps taken the toughest approach so far, as their mayor Jaume Collboni actually said there will be no more tourist rental flats in the Catalan city by 2028.

READ ALSO: Can Barcelona really ban all Airbnbs?

So is it possible to envision a future where holiday lets are not allowed in Spain? And if so, would it be better for small and big investors to ditch plans to buy a Spanish property if the primary purpose of it is to let it out to tourists?

Hatred of holiday lets is on the up in Spain, the world’s second most visited country, prompting authorities to try and reconcile the interests of locals and those invested in this lucrative sector. (Photo by OSCAR DEL POZO / AFP)

Spain’ Housing Minister Isabel Rodríguez has on several occasions hinted at the need to “regulate tourist flats” rather than banning them entirely, although in July she did say “if we need to ban tourist flats, we will; if limiting them is enough, we’ll limit them”.

There’s been talk of legislation to ban holiday lets in residential apartment blocks, as well as putting a stop to temporary accommodation (longer than short-term lets but shorter than long-term rents).

But in truth, things are moving slowly and the Spanish government appears to be somewhat sitting on the fence regarding restrictive measures, all too happy to pass the buck to the regions and individual town halls.

There is clearly an awareness of all the vested interests in the holiday let industry, that not all landlords own a dozen properties, and even the legal implications of banning citizens from doing as they please with their assets.

What does seem clear is that city centre properties and those in the popular old quarters of Spanish cities and towns are most likely to be limited by local regulations, at least temporarily.

The same applies to tourist flats in residential buildings, as there is currently an amendment in the pipeline which would give communities of neighbours the power to veto new holiday lets in their blocks.

Therefore, investors should consider whether properties that fall in these categories are future-proof in terms of short-term letting, and whether they’ll have to swap over to long-term letting at some point.

Spain’s latest Housing Law, which came into force in 2023 and sought to stop long-term rents from increasing, has actually led many landlords to either find loopholes or take their properties off the market.

READ MORE: Why landlords in Spain leave their flats empt rather than rent long-term

With more demand and less stock, rents have logically continued to increase in 2024.

The legislation has clearly backfired, and with a boost in social housing a very long-term solution, Sánchez’s government may be forced into a corner and have to act vis-à-vis holiday lets if the situation becomes more untenable.

READ MORE: Has Spain’s Housing Law completely failed to control rents?

A blanket ban is unlikely, as short-term rentals in more rural locations with fewer inhabitants have less of an impact on rents.

But buying a property in Spain in a central or sought-after residential area in Spain (especially in an apartment block) with the sole purpose of letting it out to tourists, now appears to have its risks as a long-term investment.

READ ALSO: VUT, AT or VV? Why Spain’s holiday let categories matter to owners

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