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Property news in Spain: Who is buying luxury properties and where are they?

From the most popular places to buy luxury property in Spain to where home renovations are the most expensive in the country, stay up-to-date on the latest Spanish property news with The Local's weekly roundup.

Property news in Spain: Who is buying luxury properties and where are they?
Property news roundup. Photo: Claudia Stekelenburg / Pixabay

The Balearic Islands and Malaga are the most popular places for luxury properties in Spain

The Balearic Islands, Malaga and Madrid are the most popular places where foreigners are looking to buy luxury homes in Spain, according to data from a study published this Tuesday by online real estate website Idealista. This is based on the searches for homes that cost over one million euros.  

The Balearic Islands of Mallorca, Ibiza, Menorca and Formentera were the most popular with 29 percent of the searches, while Malaga came in second place with 16 percent of the searches by foreigners. The nationalities with the greatest interest in luxury properties in Malaga are British and Swedish.

In third place was Madrid with 15 percent of the searches for luxury properties, followed by Barcelona with 11 percent.

Germans, British and French are the most interested in buying luxury property in Spain 

The Germans are the most interested in buying luxury homes Spain that cost over one million euros, according the report by Idealista, representing 18 percent of searches on their site.

This is followed by the British with 11 percent, then the French with 10 percent of the searches. The Americans with nine percent of the searches for luxury properties and the Dutch with seven percent, take fourth and fifth place. 

Home renovations in the Basque Country are the most expensive in Spain

The Basque province of Álava is the of the most expensive place to carry out comprehensive home renovations in Spain, according to home renovation site Plan Reforma portal, which claims to have carried out more than 200,000 calculations of housing construction costs in the last eight years. Here, the company estimates that a major home renovation would cost around €35,000.  

The is followed by another Basque province, that of Guipúzcoa, which is the second most expensive on the list. The Balearic Islands and Navarra come in third and fourth place, with the province of Pontevedra coming in fifth place.

Boom in demand for cave home properties 

There has been a rise in demand for cave home properties in Spain according to local real estate agents, such as those in the small town of Guadix near Granada. Here, there are more than 6,000 cave homes, one of the greatest concentrations of cave homes in Europe.  

Because of the rise in demand, prices for cave homes have also increased exponentially. Prices of cave homes go for varying amounts, however, and you can still grab some bargains. The Local Spain found one five-bedroom cave property being sold through real estate site Tecnocasa for 89,000 and another luxury five-bedroom cave home on Idealista for 495,000.

A town in the Valencia region creates the first bank of houses to combat depopulation

Depopulation affects much of rural Spain and to try and fix the problem in their town, residents of the town of Vistabella in Castellón, have launched a pioneering project to stimulate the housing rental market and stop the loss of useful agricultural land.

The bank of rental homes aims to turn the City Council of this small municipality, with just over 300 inhabitants, into an intermediary between owners and potential tenants that stimulates local supply and demand. They hope that by doing this, they will attract new families and opportunities to the town. 

Mayor of Vistabella, Jordi Alcon, explained that the objective of the Compromís bank of houses is to create a registry of empty houses. “We have many houses but no offers to rent or buy, he said. The bank will “put the owners of empty and unused houses in contact with people interested in renting a home in Vistabella,he explained.

If you want to read more property news, you can see last week’s round-up here

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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?

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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