404 Business Update | October 2026 🗞️

This month we are doing it a bit differently. Alongside what we have been up to, we wanted to share what we are seeing in the Spanish real estate market.

🏢 Transactions

• We looked at more than 30 new deals in October and passed on 90% of them, most of them on price. Broker-marketed residential buildings are priced by flat buyers and rental investors, either on resale values per square metre or at yields of 3.8 to 4.5%. In Madrid's best neighbourhoods this means buildings are still priced as if they would be sold flat by flat, at levels a student residence operator cannot afford to pay. What works is usually a building with an existing alternative residential use, or one that needs a new use, a change of licence and a refurbishment. Unless you have a way in, or the seller is mispositioning the product, there is very little chance of buying at a good basis.
• On the other hand, the rental growth we are seeing is very strong, and it counterbalances some deals at a higher basis. Secondary cities are very interesting too, but student demand is lower there and capital takes more convincing.

📈 Borrowing and Rates

• The ECB held its rate at 2.5% on 29 October after two increases this year, with inflation back at 3.8%. The 12-month Euribor averaged 3.24% in October, about a point higher than a year ago. Banks have become more selective, which favours buyers who bring real equity and buildings that already earn income. Margins are widening too: on standing assets we are seeing lenders move from around Euribor + 1.5% to Euribor + 2%, which takes all-in costs above 5%, against under 4% a year ago. Despite this, lending is available, especially in the alternative living sectors, typically at 50 to 60% of total cost for projects that are not developments.

🏛️ Housing Legislation

• In October the government passed two housing decrees. One extends existing long-term rental contracts. The other limits seasonal rentals to 12 months, requires each one to justify why it is temporary, and caps the combined rent of the rooms in a shared flat at the rent of the whole flat, which is how many students live today. It also brings in 10% VAT on tourist stays of up to 30 nights. With Parliament dissolved ahead of the 29 November election, a committee of Congress will vote on 12 November on whether the decrees survive, and the seasonal and room rental decree could pass or fail by a single vote. The market has not waited: rental listings have fallen by 19% since late September, and by 26% in the Madrid region. For students this means fewer and more expensive rooms in shared flats, and we expect more students to turn to purpose-built residences, which supports our view on the sector.

⚙️ Operations

• We keep building our operational excellence and know-how. Nacho Ambel, our Head of Operations, spent his first month setting up the processes Cuatro will run its residences on. That meant selecting our technology stack and the external providers we will work with, and going through every underwriting and operational assumption in detail. The result is a reliable set of assumptions that lets us underwrite deals faster and more precisely.

💰 Investor & Network Engagement

• We have launched the 404 Lounge, a private community of investors and family offices, where we share our market commentary and our views on investment strategy in Spanish real estate. Membership is free and starts with a short investor statement at 404capital.io/lounge.

This update is for information only and does not constitute an offer or invitation to invest in any security, fund or vehicle.