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Seven reasons why you should invest in parking spaces in Spain

It may not seem like much, but letting out parking spaces can be a lucrative business in Spain for people with few savings who want a quick and safe return on investment. Here’s why you should maybe consider a buy-to-let parking spot. 

Published: 26 July 2021 15:16 CEST
Updated: 7 November 2021 09:24 CET
Seven reasons why you should invest in parking spaces in Spain
Photo: Peter /Pixabay

There will always be demand

As most people in Spain live and work in tightly-packed cities where parking spaces aren’t always readily available, having a spot to park can save drivers a lot of time and worry about their vehicles. 

According to 2017 data by Spanish property giants Idealista, only 35 percent of homes in Spain have a garage or parking lot, but in 2019 there were 29.4 million cars in circulation in the country. 

Even though there are plans to curb emissions and implement greener transport plans across the country, the compact design of urban areas in Spain means that demand for parking spaces is likely to be around for the foreseeable future.

The pandemic has increased demand further

There’s also been a rise in demand for parking places to rent since 2020 as people in Spain look to avoid enclosed spaces and a higher risk of infection on public transport. 

This trend is likely to peak now that workers in Spain are slowly returning to their workplaces and will need somewhere to park their vehicles near their offices or homes after their daily commute.

Prices have dropped

A study by Spain’s other leading property search engine Fotocasa found that the average sale price of a parking place in Spain has gone from €13,762 in 2015 down to €9,817 in 2020. 

Castilla y León (-37 percent) , Aragon (-36 percent), Navarra (-36 percent), Murcia (-33 percent), Valencia region (-33 percent), Asturias (-31 percent) and Andalusia (-28 percent) are the regions where the prices have dropped the most. 

Photo: Tim Smurf/Unsplash

Perfect for small investors 

For people with few or moderate savings who want to diversify their earnings without spending more than they can afford, buying parking spaces in Spain can be a good option. 

The smaller price tag also means that the likelihood of having to resort to financing is lower, meaning less interest to be paid.

The location of the parking space is the crucial factor that will determine how much the asking price is; depending on where it is it could go from costing €5,000 to €50,000. 

Logically, there’s little point to investing in a spot in a sparsely populated town or village. Central and sought-after city locations are the sensible options. 

The most expensive cities to buy a parking spot in Spain are San Sebastián (€25,734), Bilbao (€23,757) and Granada (€20,902), Ourense (€19,922), Santander (€18,962), Barcelona (€18,538), Jaén (€17,806), Madrid (€17,274) , Córdoba (€17,151), Pontevedra (€16,868) and Girona (€15,367).

Rental rates have risen

This greater demand has resulted in the average price at which parking spots are rented out in Spain increasing slightly.

Depending on the location, parking space rental rates can go from €50 to more than €300 euros per month 

For example, in Barcelona they rose by 2.2 percent in 2020 compared to the previous year, and in Madrid it rose by 1.2 percent, according to Fotocasa.

Hassle-free and low maintenance costs

It may seem obvious but cleaning, repair and other maintenance costs are practically non-existent with parking spaces. 

Lessors are less likely to run into problems with lessees renting their parking spaces than if they were letting out a property, both in terms of damage and non-payment.

Parking spaces are also not subject to meeting the stricter rules of Spain’s Property Law (Ley de Arrendamientos Urbanos) as in the case of residential properties. 

However, investors do have to consider they’ll have to pay community expenses, real estate tax and perhaps some maintenance costs such as leaks in the ceiling. 

Low risk

Leading Spanish property experts such as Colliers, Gesvalt and Merlin all agree that buying a parking place to rent out is one of the safest Covid-era investments around.

The reasons given for this include the steady rise in value of parking spots since the 2008 financial crisis, the increased usage of private vehicles during the pandemic and their comparatively lower price. 

“The average parking space investor is very conservative, they settle for returns starting at 3.5 percent but that are very safe and they don’t want problems with tenants,” Colliers General Director Alberto Díaz told El País.

 “They’re always thinking of getting that extra money for their retirement.”

Good return on investment

You may not be able to get the high return on investment that residential properties can offer but parking spaces can see investors break even quickly depending on how much they’re charging to rent the spot per month.

“You can expect a gross yield of 7 percent to 7.5 percent depending on the location, parking space features and size of the parking space ,” according to Gregorio Martín-Montalvo, general manager of Solvia real estate company.

Are there any risks?

The main risk is not choosing the right location to buy the parking space, so a careful assessment (perhaps with the help of an expert) is the safest way to avoid possible letdowns. 

Other less likely risks include a coronavirus financial crisis that’s as severe as 2008’s (which drove down demand and rental prices for parking spaces).

Furthermore, even though existing restrictions on urban parking in cities in Spain can result in many people opting to rent private parking in buildings, new green measures that may be introduced by the Spanish government to dissuade drivers from driving may have an impact on parking space demand. 

An example of this are last-mile parking schemes, which can include large cost-free parking lots where commuters can leave their cars outside the city centre and use public transport as a means of tackling congestion.

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PROPERTY

Is it better for landlords in Spain to rent to temporary or long-term tenants?

If you own property in Spain that you don’t live in yourself, it’s likely that you’ll be renting it out, but is it best to rent it out on a temporary or long-term contract?

Published: 16 February 2024 11:14 CET
Is it better for landlords in Spain to rent to temporary or long-term tenants?

Your decision to rent out to temporary or long-term renters will of course be influenced by whether or not you intend to use your property yourself during parts of the year, but if not, it’s worth keeping in mind what the differences are. 

Besides the duration of the contract, the laws that govern each situation are different and the tax implications differ too.

READ ALSO: What are the requirements for landlords to rent out a property in Spain?

Long term contracts

Renting out long-term is governed under the Urban Leasing Law (LAU), which aims to provide shelter to families permanently and indefinitely.

It is possible to update the rent each year, depending on the price index or specific regulations at the time.

For example, in 2024, there is currently a three percent price cap. This means that you won’t be able to raise the rent on contracts that are already in force above three percent. The rental cap, however, does not apply to new contracts signed, or those signed after 2019.

Long-term contracts have a minimum duration of five years, however, your tenants can leave any time after six months as long as they give 30 days’ notice.

If you decide you need the property for yourself, you must wait until one year has elapsed on the contract and then give your tenants two months to vacate the property.   

If you decide to sell the property on the other hand, your tenant has the right to stay for up to three months or until the property is sold.

READ ALSO – Renting in Spain: When can a landlord legally kick out a tenant?

Temporary contracts

Regarding temporary rental, the law frames it under the label “rental for use other than housing”.

Temporary contracts must be for a minimum of 32 days, any shorter than this and they would be considered tourist rentals. Rentals to tourists are covered under a completely different set of rules and regulations and in many places require a tourist licence too.

READ ALSO: The rules for getting a tourist licence to rent out your Spanish property

Temporary contracts must also not be longer than 11 months. Beyond that time it would be considered a long-term rental and a long-term contract up to five years like above, would need to be issued.                                                                                                 

There is more flexibility when setting rents for temporary contracts. These are typically higher than long-term rents because of various factors, such as the addition of furniture, bills and wi-fi being included and the fact that they’re often rented out in high season. 

It’s worth keeping in mind that a high tenant turnover carries a slightly greater risk than when you rent your property out long-term. You or a management company will need to be more involved too.  

READ ALSO: Why you should consider renting out your property in Spain to students

It’s important to consider taxes when deciding to rent out to temporary or long-term renters. Photo: Andrea Piacquadio / Pexels

Declaring tax on rent from long-term contracts

You must pay taxes on your net income if you rent out long-term.  

This means adding up all the gross income for the year and deducting all the expenses involved with the rental. The following expenses are deductible:

– Waste collection fee
– Real Estate Tax (IBI)
– Insurance in case your tenants can’t pay the rent
– Home Insurance
– Community expenses
– Mortgage interest
– Real estate commissions

As the apartment serves as the tenants’ habitual residence, the tax authorities will also apply a 60 percent bonus on the net income before subjecting it to tax. This means the amount subject to personal income tax is only 40 percent of the net rental income.

These bonuses may be even higher if the conditions of the new Housing Law, introduced in 2023, are met.

Declaring tax on rent from temporary contracts

You must declare the income from all the temporary contracts that occur during the same fiscal year.

Expenses can be deducted just as before, but these may be different such as cleaning services between tenants and household bills, if they’re included.

You are also taxed on your net income, however, there are no bonuses applied like with long-term contacts as it is not considered to be the tenants’ main residence.

This means you will pay tax on 100 percent of the net income and not 40 percent like above.

You will also be charged tax on any time the apartment has been empty. This amount will depend on the cadastral value of the home and the number of days there hasn’t been anyone staying in it.

Declaring tax on rental income as a non-resident

If you’re a non-resident who owns a property in Spain and rents it out, the rules on taxes will be slightly different.

As a non-resident, you must pay income tax on rent earned in Spain as well as local property taxes such as waste tax and IBI.

If you rent your property out temporarily then you will need to submit quarterly tax returns, not just annual ones. You will also be charged tax for the periods when your property was empty. 

Those from the EU will be charged 19 percent, while everyone else will be charged 24 percent.

It’s very important to remember that if you’re from a non-EU country, such as the UK, the US or Canada you will not be allowed to deduct any expenses from your rental income, therefore you will pay tax on the full gross amount you earn.

To find out more, read our guide to non-resident tax in Spain.

Conclusion

The answer as to whether temporary or long-term contracts are best for landlords will completely depend on your situation and your preferences.

Long-term contracts are easier because you won’t have so much turnover and won’t have to be as involved. There are also various bonuses and tax breaks you can benefit from.

You can earn more from temporary contracts, but this means you will also pay more in taxes too and won’t get any bonuses. It will also take up more of your time, however, it’s a good option for those who want to use their property themselves for part of the year. 

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