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PROPERTY

Spanish property news: foreigners buying again, mortgages worsening but no property bubble

In this week's property roundup, we cover the return to pre-pandemic levels in property purchases by foreigners, the big rise in rental homes in the next three years, the EU's views on a property bubble in Spain and why a terrace is always a good investment.

property news spain
Spanish properties with a terrace sell for 36 percent more than similar sized homes without one. Photo: Panoramic Villas Costa/Pixabay

Foreigners back to buying in Spain 

The rate of properties bought by foreigners in Spain is back to pre-pandemic levels, representing 12.6 percent of the total number of purchases in the fourth quarter of 2021. 

These are figures not seen since the last quarter of 2019, the last ‘normal’ period before the start of the Covid-19 pandemic and ensuing lockdown and travel restrictions saw operations from overseas buyers drop considerably.

Britons are back to being the main foreign buyers in Spain (12.4 percent) followed by German nationals (10.9 percent), French (7.8 percent), Moroccans (5.7 percent), Belgians (5.5 percent) and Swedes (5.2 percent). 

And the regions with the biggest rise in foreign buyers are the ones that extranjeros traditionally prefer to buy homes in: the Balearics (39 percent foreign purchases), the Valencia region (24.3 percent) and the Canary Islands (25.9 percent).  

More than 100,000 new properties to rent in three years

Developers, investment firms and the Spanish State will build 102,650 new rental units in Spain by 2025, according to data by consultancy firm Atlas Real Estate Analytics. 

This evidences the rise in build-to-rent projects in Spain, especially in cities such as Madrid, Barcelona, Valencia, Málaga or Alicante. 

Ninety-five percent of properties being rented out in the country are owned by private individuals, where the remaining 4.4 percent is in the hands of large property owners with ten or more properties.

Spain’s new housing law, which still needs full parliamentary approval, proposes plenty more regulation of the country’s rental housing market, which Atlas Real Estate Analytics believes could result in large property holders putting as much as 67 percent of their stock on the market.

Mortgages affected by high inflation 

Spain’s mortgage market experienced its best year in the last decade in 2021, but experts have warned that this scenario could have its days numbered as market conditions are beginning to change and in the coming months customers will see mortgage loans rise.

The first symptom of this change can be seen in the Euribor, the index to which most variable mortgages in Spain are referenced.

It’s remained below 0 percent since 2016 and broke its negative record in January 2021,but the rise in inflation in Spain could mean Spaniards pay on average €150 more in variable mortgage payments during 2022. 

The rise in variable mortgage interest rates could also mark the way for the fixed-rate mortgages banks are willing to offer.

But it won’t be a case of hipoteca rates shooting up this year, but rather that 2022 won’t be as good a year to take out a mortgage in Spain as 2021 was.

READ ALSO: Which Spanish banks offer the best mortgages now?

Spain not at risk of property bubble: EU

The European Systemic Risk Board (ESRB) has recommended that Germany and Austria should curb a boom in house prices by setting mortgage caps to remedy the problems caused by the bubbles in their real estate markets, in a recent report in which it alerted several other countries of bubbles in their residential real estate markets.

But Spain was not among them. 

The ESRB, a body that was created in 2010 after the global financial crisis to ensure the safeguarding of financial stability in Europe, is not concerned by rising house prices in Spain, considering their overvaluation to be among the lowest on the continent.  

In five countries that already received warnings in 2019 and implemented some regulations – Denmark, Luxembourg, the Netherlands, Sweden and Norway – property prices remain high.  

There has been some speculation in the Spanish press recently that Spain may not be far off another property bubble, but most real estate experts agree that the rise in prices expected this year cannot be classified as a bubble. 

Why buying a flat with a terrace is always a good investment 

The pandemic may have increased the demand for properties in Spain with outdoor space but having a terraza in your Spanish property has always contributed highly to its price factor. 

According to a study by Idealista in 2017, properties with a terrace sell for 36 percent more than similar sized homes without one. 

It also makes rent 15 percent higher on average if you have one.

Logically, the weather and the location of the property also have a big impact on this, but generally speaking having an outdoor space (especially a terrace rather than a balcony) can be a valuable asset in sunny Spain.

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TOURISM

EXPLAINED: What are Spain’s rules and taxes for Airbnb rentals?

If you've ever thought about making some extra cash by renting out your Spanish property on Airbnb, here's everything you need to know, from how to apply for tourist licences to the taxes you need to pay and the regional differences.

renting out your holiday cottage on Airbnb
What you need to know about renting out your property on Airbnb in Spain. Image: Hans Braxmeier / Pixabay

In 2019 there were over one million tourist apartments in Spain, half a million of which were registered on Airbnb.  

While the Covid-19 pandemic has no doubt brought this number down, Spain still has a huge number of tourist rentals. 

READ ALSO: A third of Spain’s Airbnb landlords own five or more properties

The country has had a turbulent relationship with tourist rental sites such as Airbnb however, with many city councils battling against rising numbers of illegal apartments and the impact it has on rental prices for residents. 

In 2016, the Catalan Tourism Register fined Airbnb €30,000 for not responding to demands from the administration requesting details on homes advertised without registration numbers. In 2018, Spain’s Balearic Islands also attempted to fine Airbnb €300,000 for advertising unregistered tourist flats, but the Balearics’ Supreme Court annulled the fine in 2020.

So, with all these tough crackdowns and rules, how can you make sure you rent out your apartment legally on platforms such as Airbnb?

How do I legally rent out my property in Spain on Airbnb?

Generally, most regions in Spain require you to apply for a tourist licence before being allowed to rent your accommodation out to tourists. The process is slightly different for each region but is generally done online through each regional government site.

For more information about your area, you should visit your local Town Hall or Ayuntamiento

In March 2019, a new law was passed in Spain which states that if three-fifths of the owners of a building are against short-term rentals in their premises, they can decide to limit or prohibit tourist apartments in their building.

This means that as well as registering your accommodation with the relevant authorities, you must also get permission from the other owners in your building.

In the last few years, several Spanish regions have also brought in new laws and limitations for tourist accommodation, so make sure you do your homework before considering renting out your accommodation on Airbnb.

This is because not only do most regions in Spain have differing rules, but many municipalities do too. For example, the rules for renting out accommodation in the cities of Barcelona or Valencia are different from the rules for the rest of the region. 

Andalusia

The Andalusian government define tourist accommodation as a residential property that is repeatedly rented out to tourists and charged for. It can be rented through tourism channels such as travel agencies or companies that allow bookings to be made such as Airbnb.

In order to legally operate an Airbnb apartment in Andalusia, you will need to register the property with the Tourism Register of Andalucía, and agree to comply with the regulations of the Tourism and Sports Council.

Find out how to apply for registration here

If your application is successful, you will receive a registration number, which you must add to your Airbnb listing. For more information on renting out tourist accommodation in Andalusia, you can look on the Andalusian government website

Catalonia

The Catalan government consider tourist accommodation to be any accommodation rented out to paying guests for short term stays. In order for your apartment to be legal, you must register it with the municipal authorities and apply for a tourist licence.

You can apply for your licence or Habitatge d’Ús Turístic (H.U.T) number here

Be aware that in some places in Catalonia, such as Barcelona, it is not possible to get a licence anymore. In 2017, Barcelona mayor Ada Colau banned new applications so the only way to legally rent out an Airbnb apartment in Barcelona is to buy one of the circa 9,600 apartments that already have tourist licences.

You need a licence to register your property before renting it out on Airbnb. Photo: InstagramFOTOGRAFIN / Pixabay

Valencia

You need to register any tourist accommodation in Valencia with Valencia’s Tourism Register by submitting a formal notice to the Territorial Tourism Service of the province where your apartment is located and state your intention to use the property for tourist accommodation. You can find out more about Valencia’s tourism accommodation laws here

Once you have been granted your licence you must display your registration number on your Airbnb listing.

In June 2018 the Municipality of Valencia issued various limitations for tourist apartments in the city. These are: 

  • The tourist accommodation must be located on the ground floor or the first floor.
  • The apartment must not be located above or on the same landing as another private residential dwelling.
  • The building must not have more than 50 percent of tourist accommodation.
  • In the Ciutat Vella, you can only rent your apartment out to tourists for a maximum of 60 days.

In January 2019 a municipal decree for Valencia city was introduced which requires you to renew your tourist licence every five years.

Madrid

In Madrid, you are required to register any tourist accommodation with the Register of Tourism Enterprises and will have to agree to comply with the existing regulations. You can find the link on how to do so here

Once you receive your licence number, you must also add it to your Airbnb listing.

In March 2019, Madrid city limited the number of tourist rentals possible in different neighbourhoods, so if you plan on renting out an Airbnb apartment in the city, you’ll need to contact the Madrid City Council first to see what your options are.

Balearic Islands

If you want to rent out tourist accommodation in the Balearic Islands you must declare your intention to do so and obtain a registration number from the General Register of Companies, Activities and Tourist Establishments of the corresponding Council.

Mallorca

You can register your tourist apartment and apply for a licence in Mallorca here

Ibiza

You’ll find the link for registering your tourist accommodation licence in Ibiza here

Menorca

You can apply for your tourist licence in Menorca here

Formentera

Apply for your registration for Formentera tourist apartments here

Mallorca especially has cracked down hard on tourist rentals and since July 2018 introduced a complete ban on tourist apartments in the capital of Palma de Mallorca. This means that no more licences are being issued, even though Airbnb still shows many apartment listings there.

Asturias

If you want to rent out your flat on Airbnb in Asturias, you will need to register your accommodation with the Ministry of Employment, Industry, and Tourism here.

Like the other regions, once it’s complete, you will receive a registration which you must display on your Airbnb listing.

Navarra

The Tourism Registry of Navarra requires you to submit a responsibility statement to the Directorate General of tourism. You can register your tourist apartment and apply for a licence here

There are slight differences in the process depending on whether you are registering a rural property or a tourist apartment. 

Taxes

Taxes will of course be different for everyone, depending on their circumstances, but generally you will be liable to pay tax on any money you make from renting out your property on Airbnb.

Legally you must declare your earnings from renting out your tourist accommodation to the tax authorities, whether you are a resident in Spain or own a property as a non-resident 

This IRNR (Non-resident Income Tax) is 19 percent on net income for EU residents and 24 percent for non-EU residents.

Crucially however, foreign non-resident homeowners from the EU, Norway and Iceland can claim back many more expenses (mortgage interest, insurance, IBI, community fees etc) which non-EU resident property owners cannot.

READ ALSO: ‘It’s absurd’ – How Britons who let out properties in Spain will see taxes triple after Brexit

Depending on your situation, you may be required to present these earnings on your yearly ‘declaración de la renta’ tax return. However, if you regularly rent out your accommodation to tourists and it is a business for you, then you may be required to register as autónomo or self-employed. This means sending in quarterly tax returns declaring your earnings, as well as paying social security. You may also have to charge IVA or VAT.

READ ALSO – Self-employed in Spain: What you should know about being ‘autónomo’

You should always speak to your gestor or accountant about your specific tax situation and what you are liable to pay. 

In some regions, you will also be obliged to collect a nightly tourist tax from your guests and declare it to the relevant authorities in your area. This may require filling out extra tax forms too.

In 2018 Spain introduced a new tax form called the Modelo 179, specifically for intermediary companies such as Airbnb which require them to identify the properties and the owners renting out apartments on their site, the number of days the property has been rented out for, the income amounts and the means of payment.

This means that it will be very difficult for you not to declare your rental income to the tax authorities because they will already have a record of how much you earned.

What are the consequences of not getting a tourist licence?

In most cases, if you do not have a tourist licence and are found out to be renting out your property on Airbnb or similar, you will incur a hefty fine. Fines differ slightly depending on your region.

In the Balearic Islands, for example, property owners who rent out their apartments illegally can be fined anywhere from €20,000 to €40,000, while in Barcelona you can be fined up to €60,000. 

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