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.