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Assetsure News 19th September 2007
Why invest in the
Spanish Property Rental market?
There is still huge
demand for by British residents retiring and moving to Spain to live and work as
well as buying rental property for
letting purposes. Over million British
homeowners should have either bought properties to live in or to rent out in
Spain and it is predicted this will rise by at least 0.5 million by 2008. People
simply want to get away from the rat race and have a more easygoing lifestyle.
With an increase in the number of of small business people and home workers, the
ability to live and work abroad is becoming more and more flexible -
especially with the introduction of broadband, video conferencing and Internet
telephony. So what are the factors which mean that a buy to let investment in
Spanish holiday homes is still sensible in the medium to long term
(despite historically high property purchase prices):-
Firstly, the
beachside lifestyle sunny climate, outdoor sports such as golf, swimming and
sailing are all popular holiday activities. In addition, second
holiday homeowners living in Britain (with a
holiday home rental in Spain) now have fantastic low cost air fares and new
airports - meaning that demand for visiting a rental villa and/or managing a
rental property far easier than in previous years.
Secondly, the
cost of housing is much lower in Spain relative to the high property prices
across the United Kingdom. As a result, property investment in Spain have is
still achieving an average of 5% to 7% rental yield return by year. In the UK
landlords are now seeing much lower returns and there are also a lot of
landlords selling UK property is because the yields are simply not viable. It is
fairly widely accepted that off-plan does not represent the same level of
potential profit growth in mainland Spain that has been seen at the last 20
years (as prices have stabilised and there is now an oversupply of properties).
However, economically it still allows a low cost entry for the potential
landlord investor looking for a descent yield.
Thirdly, Spain's
growth in tourism still continues and it still remains the Europe's largest
holiday hotspot for the British. Spain is already the most popular Golf
destination witch World Class courses, great climate and good sea views.
Fourthly, there
has been an increase in the short term demand for rental property for 3 month
letting contracts particularly during the winter months form the older
generation seeking a healthier warmer climate. This phenomenon is similar to the
'snowbirds' where Canadian residents would fly down to Florida and take up 3
month rentals, during the winter months to enjoy some holiday sunshine and
relaxation.
Fifthly, the
Spanish government is now recognising that the law also needs to protect the
landlord investor as well as the tenant. Housing minister Carme Chacon
explained: "Our efforts are about young people and access to housing,
particularly through renting." In the past landlords have been put off from
buying
holiday home rentals due to the fact that there
was not really a legal framework in place to protect the landlord (such as the
assured short hold tenancy agreement that we have here in the UK). In addition,
the Government is a aiming to increase the proportion of a cost housing by over
60 per cent to help provide suitable rental accommodation for Spanish nationals.
Also, changes in the legal framework the Spanish government is also providing
assistance to tenants of a younger age as well as grants to businesses in order
to help stimulate the rental market - whether this be for Spanish
nationals all holiday makers on a short-term let. It should be noted that the
Spanish government is also trying to clamp down on the number of
landlords that have not declared to the tax
authorities that the property is a rented out for letting purposes and therefore
should be paying local tax revenues to the Spanish government - this is a
particular problem on the southern coast where the majority of the holiday homes
are located.
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Copyright Assetsure Limited 2007
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