The Canary Islands government has introduced a new and drastic regulation on holiday rentals, injecting critical uncertainty into the real estate markets of southern Gran Canaria. The law, already in effect, imposes a five-year moratorium on the approval of new tourist apartments and grants unprecedented regulatory control to local councils. This policy shift poses a direct threat to the strategy of investment funds that rely on acquiring properties for tourist rentals.
The most forceful measure is the five-year moratorium on new VV licenses marketed by operators such as Airbnb.com o Booking.comDuring this period, investors' ability to expand their holiday rental portfolios is frozen, except for assets already registered.
The value of already registered apartments ("legacy assets") will skyrocket, as their licenses become a scarce and highly regulated asset. Conversely, the value of unregistered or newly built properties intended for short-term rentals will plummet due to the inability to monetize the investment under the tourism model.
The potential ban on transferring holiday rental licenses in cases of sale or inheritance is a major setback. If this provision remains in place, investors will be unable to monetize the license upon selling the asset, severely diminishing the long-term value of their tourism investment. The new law delegates the decision regarding the location and density of holiday rentals to the municipalities, requiring them to adopt a specific plan in the case of southern Gran Canaria. This decentralization of regulatory risk complicates investment, as market players must now contend with divergent local regulations, which will focus on:
The law imposes a strict limit, allowing a maximum of 10% of the total habitable area for tourist use (20% on smaller islands). In high-demand areas like southern Gran Canaria or Tenerife, this limit is practically an insurmountable glass ceiling for future growth. The ban on converting commercial premises and new buildings (within the first 10 years) into tourist accommodation eliminates two key sources of asset supply for investors.
The Canary Islands government has implemented a massive regulatory intervention to protect the residential market and control population pressure. Tourist rental operators and private equity funds face a hostile regulatory landscape where long-term planning is highly uncertain and the value of their assets is subject to the shifting whims of local councils.
