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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

Q&A: What to do if you buy a property built illegally in Spain

Buying an illegally built property in Spain is fairly common but can have several consequences down the line. Here's what you need to know, how to make it legal, whether you can sell it, and the benefits of doing so.

Published: 25 April 2024 09:35 CEST
Q&A: What to do if you buy a property built illegally in Spain

Unfortunately, over the years, many properties have been built illegally in Spain, not adhering to local rules and regulations. Foreigners who don’t know the legislation can easily fall into the trap of buying one of these properties, only to find out later down the line.

Maybe it’s when they come to sell or perhaps it’s when they want to do works or improvements on the property.

There are several reasons a home could have been built illegally in Spain. Firstly, it could have been built on the wrong type of land. This is it could have been built on suelo rústico, rural land where residential properties are prohibited, also called no urbanizable. 

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It could have also been built too near the coast. This is down to the Ley de Costas or Coastal Law, which was brought into force in December 1989 in order to protect the costas from overdevelopment and high rises spoiling the landscape. 

The law defines different areas of the beach and dictates which is public land, owned by the state and which parts can be owned privately and built on.

If you buy or own a house in one of these non-buildable zones, there are many problems you could face down the line, often sooner rather than later. This is because there are several rules you have to abide by concerning works, reforms and extensions. In some cases, they may not be allowed at all and everything must be approved first by the local government by providing a detailed project.

Because of coastal erosion, this issue is getting worse as some shoreside homes that were once built outside of these areas are finding that they’re now illegal.

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The house may have also had extensions made to it that were built without a license, meaning that the extra parts are illegal.

Q: How do I know if my home is legal or not?

A: Unfortunately it can be difficult to know if your property is legal or not. You could have bought and signed for it with a notary and it could be inscribed on the Property Registry, but this still doesn’t mean it was built to the correct specification and on the right land.

The only way to truly tell is to find out if your home ever had a Licencia de Primera Ocupación or First Occupation license, also referred to as a Cédula de Habitabilidad or Certificate of Habitability. This means that according to the authorities, it is suitable to live in and has the correct licenses.

READ ALSO: How to get Spain’s certificate of liveability for properties

Q: What happens if my property doesn’t have a habitability certificate?

A: If your property has never had a Certificate of Habitability, you must regularise the legal situation. First you’ll need to start a legalisation file (expediente de legalización) and contact the town hall. Depending on the seriousness of the case (ie. where exactly it was built, if there’s any structural danger, whether the entire property is illegal or just an extension) the cost of making an illegal property legal can be considerable. As such, each case must be studied individually with the help of an expert to determine whether it is even feasible or worth the investment.

The next step is to bring in an architect and check whether the property complies with all the building regulations. If it does, you simply need present the expediente de legalización to your local town hall, who will confirm whether or not the property adheres to building regulations and can be made legal.

If it doesn’t, you’ll need to consider whether it will comply with the regulations after some renovations. If that’s the case, you’ll need to draw up a renovations project document (proyecto de reforma) outlining the proposed changes and how they will adhere to building regulations. It must be presented to the town hall along with your expediente de legalización.

According to law firm Acal, the legalisation process can be broken down into steps as follows:

  • Contact the town hall.
  • Begin with the expediente de legalización when the town hall confirm whether or not the property can be made legal.
  • Pay the corresponding fees and taxes (in this case it will be IBI) depending on your municipality and region.
  • If you need to make renovations, obtain the proyecto de reforma and hire an architect.
  • Obtain a building permit from the town hall.
  • Once completed, register the property in the Land Registry.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

Q: Do I really need to make my property legal?

A: Yes, because it will benefit you in the long run. It doesn’t matter what the previous owner told you when you were originally buying the property, owning a property that isn’t fully legal (or legal at all) can create problems and even lead to fines worth up to 20 percent of the property’s value in extreme cases.

By going through the legalisation process and making the relevant renovations, if necessary, you gain a legal property for all purposes and with all the benefits that entails.

You will not have problems setting up, paying, or cancelling electricity, water or gas utility services. You won’t have to undertake reforms and renovation work unofficially, avoiding the eyes of the authorities. Instead you’ll be able to register your property in the Land Registry, which will make things much easier when you decide to sell it or pass it on.

In terms of selling it, perhaps that is the biggest benefit of legalising your illegal property: by registering it properly, you will be able to benefit from its full value when selling it. When a property is illegal, the appraised value will probably be no more than 40-45 percent of its real value at best.

The renovations needed to get your property in shape to meet the building regulations could be costly, but will they cost you half of the total value of your property? 

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