Recent Trends In The Spanish Property Rental Market
After a few years in recession fueled doldrums the Spanish property rental market is showing signs of making a very healthy recovery indeed. The visitor figures to the country alone are enough to support this, demonstrated very well by the number of passengers being processed through the country’s major airports. AENA – the Spanish Airport Authority – have released statistics that show remarkable growth compared to even last year. 24 million people (17m tourists) were tended to by airports in August alone – an all time record and just shy of 5% growth on the same month last year. Tourist hot-spots are doing especially well; Madrid Barajas recording a staggering 14% increase over 12 months, alongside the municipal airports serving the Costa’s averaging a steady 5% rise.
All this is very good news for those with property to let in Spain, especially those with apartments or villas in the prime locations where demand has been heartily outstripping supply. Spain has always been a popular destination but for the last three years it has been the world’s 3rd most visited country, with the 60m tourists of 2013 forecast to have comfortably grown to over 66m by the end of 2015. Perhaps most interesting of all is that a third of these visitors don’t stay in typical hotels, instead opting for renting properties privately or through agencies for the duration of their stay. Even accounting for those who will be staying with family or in properties they already own, that’s still maybe as high as 20m people renting properties.
During the peak months alone yields of over 4% are being reported in prime locations – roughly the same as a city apartment or a typical 12-month let. Those who have really capitalized here have been the people with a mixture of properties – some smaller apartment for short term rentals, alongside other homes serving as the ‘bread and butter’ rented out over longer terms. It’s no surprise that to generate a genuine 12-month income from visitors it’s essential to be in the ‘hot-spots’ along the Costas were the weather is reliably consistent and the area popular with wealthy visitors, especially near the major golf resorts. These prime locations can realistically expect to break 8% yield this year, and there’s no reason why this cannot continue to grow as a reflection of the increasing tourist footfall across Spain.
All along the Costa’s even properties in less prime spots can expect to still have a better occupancy rate than in recent years off peak. The lure of 12-month sunshine really does appear to be quite irresistable, especially for people from overseas looking to take out leases spanning several months or longer.
Indeed this leads us into another popular strategy that is a little kinder to those without the resources to purchase elite properties. The market for long term lets to non domiciles is expanding rapidly, especially among people seeking ‘winter sun’. A common arrangement is for landlords to offer their tenants long term occupancy for the year providing that they vacate the property for three months or so during the peak season. This allows the landlord to capitalize on the market value of their property respective of the time of year, while keeping tenants in-situ for steady year-round income. Most often these tenants tend to be affluent, retired, responsible and happy to head home for a short while to visit their families. The only negative is that the landlord has to ensure that the property is maintained and serviced in their absence and account for the storage and security of the tenants personal belongings. All in all a small effort for an excellent financial return.
Of course as rental prices go up so too does the value of the quality properties. Determining what constitutes a ‘quality property’ should really be quite apparent by examining the yield/return of recent seasons and – most importantly of all – the number of reservations already in place for the next year. An ideal arrangement may sound something like this:
A three month let covering January-March, followed by three single month booking up until June. Then the property should maximize turnover until the middle of October – week/fortnightly lets are typical, although longer lets are an option (beware these often necessitate offering a small discount at the cost of guaranteed occupancy). A genuinely in demand property should be able to make rapid turnovers at near 100% occupancy for these months. Following the end of peak season, ideally a 2/3 month let for winter sun seekers.
Naturally even in popular areas with a rental boom there’s always going to be short periods of no occupancy, but it’s not unusual for the best to be hitting 90% for the year. Getting the basics is important – all properties must have all the mod-cons, especially free wi-fi, satellite TV, quality furnishings and also services such as cleaning and garden/pool maintenance at the tenants consent.
A quality property agent will understand the complexities and peculiarities that surround the property rental market in Spain. It’s not always enough to buy a good property – if it’s even a few kilometers outside the most popular areas income can be drastically less than the home deserves. Location really is key, and not necessarily just always in relation to the area. Selecting the correct region can make a huge difference as several municipal councils are imposing hefty taxes and levies upon buy-to-let properties (fueled in no small part by the massively influential hotel lobbies). This is especially important to consider when investing in property in large cities at expense of pricing out the locals – Barcelona is especially tough on this and it’s likely that these sentiments will become more vocal in coming years.