Treasury Trawling Internet For Rentals

Your rental income is being watched!
Your rental income is being watched!

Following the introduction of new regulations for short-term rental properties, the government are now employing new tactics to find and punish those who do not declare their rental income.

Up to 50,000 property owners could be in line for sanctions if they are found to be renting out their property for short-term (holiday) rentals without telling the authorities or declaring any income they receive from it.

The government have set up a special division to track down the undeclared properties by trawling internet property portals. They are also said to be monitoring electricity usage to ascertain if the property is inhabited.

The Treasury workers’ union, Gestha, estimates the total amount of undeclared taxes to be in the region of 100 million Euros, which is why they are keen to put a stop to it.

However, it’s not only a tax issue. Many in the hotel industry state that it is unfair competition as they have to comply with a raft of regulations, including health and safety issues, which undeclared rental properties do not. Black-market rentals are thought to occupy up to 30% of the total properties for rent on the Costa del Sol.

Fines of up to 25% of the rental income will be levied, being based on the size of the property and the rental costs requested by the owner. The fines can also be backdated so don’t think that owning up now to years of undeclared rentals will get you off the hook. You must prove when you began renting your property and pay the fine based on the length of time you have failed to declare the income. A little heavy handed, but necessary to bring the market under control.

There are differing opinions from industry insiders with some saying the regulations will improve the sector in both quality and safety. Opposing opinions suggest many owners will simply stop renting out their property for short-term rentals and the market will be strangled leaving a shortage of holiday accommodation.

 

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Property Rental Prices Increased in Q1

Expect to pay more for rentals in 2016
Expect to pay more for rentals in 2016

According to data released by property portal, Idealista, the cost of rental property increased by 4.3% across Spain during the first quarter ending March at 7.4 Euros per square metre, per month. Comparing on the annual rate the increase is 5.2%.

The rental market appears to be recovering more strongly than the sales market. Head of research at Idealista, Fernando Encinar, said “with the report data in hand it is clear that there is a huge demand for rental housing, and that supply is rising strongly.”

The recovery in rentals has to take into account the large amount of rental property available to the market. Excessive construction, leading up to the crisis, means there is a large stock of good quality housing resulting in a large and varied choice for tenants.

Encinar explained “Given that the construction during the years of the housing bubble left a large housing stock of good quality properties, the rise of rents can be a boost for many owners and a good choice for small and medium savers who want to seize the moment to invest in housing.

“With rates at zero and banks giving historically low yields many small investors are seeing good returns by buying homes and placing them on the rental market.”

Rentals by Community

All communities recorded an increase in rental costs during the first quarter, except for Euskadi where prices fell by 4%.

The largest increase was recorded in the Balearic Islands where rental prices have increased 11.2% to 10 Euros per square metre, since the start of the year. The closet “runners-up” were Madrid where prices increased 5.2%, Valencia which saw a 5% increase, and Catalonia where the cost of renting has increased by 4.7%.

Madrid remains as the most expensive location to rent a property. In the capital you should expect to pay 11.5 Euros per m². Catalonia follows as the second most expensive with prices of 11 Euros per square metre.

Andalucia saw prices increase 2.5% on the quarterly basis. The region shows an annual increase of 4%, remaining popular and closely matched to the average for Spain. The price of property for rent in Marbella increased 8% on the annual rate, showing a quarterly increase of 4.7%.

The Costa del Sol showed rental price increases in most areas with Estepona leading the way with a 27% annual increase. Prices in Malaga increased by 15.5%, followed by Fuengirola where rental prices increased 15.1% on the interannual rate.

Results by Province

Increases in rental costs were recorded in 38 of the country’s provinces with the largest increase registered in the Balearic Islands. Valencia saw prices increase by 6.7%, while prices in Madrid increased 5.2%. The largest decline in rental prices through Q1 was recorded in Tarragona where prices fell 8.6%.

When ranking the provinces in order of the most expensive, Barcelona leads with a price per square metre, per month, of 12.6 Euros. Madrid comes in second with 11.5 Euros per square metre p/month.

 

Spanish Property Most Expensive Up North

Spanish Property Prices
Property in Northern Spain is More Expensive

Property prices in the North of Spain are running away from the national average.

According to a report by Kelisto.es the average purchase price of a property of 80m² is vastly different depending on where you are.

The Spanish average is 131,040 Euros but take a trip to San Sebastian and you will need 328,000 Euros, 150.37% more than average. In Barcelona the price is also more than 100% above the average with a price of 269,520 Euros. Still in the North, but slightly lower is Bilbao where you should expect to pay 84.19% above the Spanish average at 241,360 euros.

At the other end of the spectrum the lowest prices were recorded in Jaen and Lleida where an 80m² property will set you back 89,600 and 91,440 euros respectively.

The trend continues when looking at rental properties. The report says that to rent a property of 80m² comes with an average national cost of 561.60 euros per month. Move up to Barcelona and this price increases to 970.40, a massive 72.79% above average. In San Sebastian the rental cost is 940 euros, 67.38% above average.

The lowest rental costs are recorded in Lugo and Ourence where you will pay 332 and 351.2 euros respectively.

As I live down in Andalucía, I did my own calculations and came up with an average price to buy an apartment of 80m² of 201,169 Euros. To get this figure I took the prices of 100 random properties (of 80m²) that are currently for sale in the region. So Andalucía is, whilst not the cheapest, only slightly higher than Bilbao.

Again, I took 100 random properties that are currently available for long-term rental in Andalucía and came up with an average of 510.10 Euros per month. As with sales, it seems Andalucían rentals are below the average price.

Property prices are predicted to rise further throughout 2016 due to low interest rates and rising employment.

 

New Decree Signals Change For Private Rentals

For the last three years, owners of holiday-let apartments have been holding their breath as the Junta de Andalucia attempt to come up with a new decree governing the renting of private apartments to holiday makers.

The decree was finalised and finally published late last week bringing the wait to an end.

Regulation of the industry on the Costa del Sol is lagging behind as other parts of Spain have had rules in place for many years, including Catalonia where the rules came into force in 2014.

You can read the official document in Spanish on the Junta de Andalucia website.

Does my property qualify as ‘holiday rental accommodation’?

If you own a private residential property in a residential zone and you regularly offer it for short-term (holiday) rentals for financial reward and you promote it via any recognised tourism channel then yes, this applies to you. Recognised tourism channels include, but are not limited to, travel agencies, third-party tourism promotors, or any channel that includes the option to make a reservation.

If any of the following applies to you then don’t worry, your property is excluded:

  • Properties that are transferred without payment or financial reward.
  • If the rental contract lasts for more than two months continuously by the same tenant (long-term rental).
  • Properties in rural areas. These properties are already covered by article 48 of Law 13/2011 of December 23rd and Decree number 20/2002, dated January 29th, Tourism in Rural Areas and Active Tourism.
  • Multiple properties (three or more) with the same owner, located in the same building, or in neighbouring buildings, less than 1km from each other. These will be classed as Touristic Apartments and will be subject to Decree 194/2010 of April 20.

Can I rent my property for tourism purposes?

If renting the entire property, the maximum capacity is restricted only by the license of occupation but may not exceed 15 people with a maximum of four people per room.

If renting a single room, the owner must also reside in the property, and the maximum capacity will also be four people per room, with a maximum of six people.

My property qualifies and I do rent it our seasonally. What do I need to do?

This is quite a list so sit comfortably and read on!

  1. An occupational license is required and your property must comply with technical conditions and quality requirements for housing.
  2. The property must be sufficiently equipped and furnished to enable immediate use.
  3. Ventilation, either via direct ventilation or via a patio must be in place as must the ability to provide window shading either by darkened windows, blinds or curtains.
  4. Fitted air-conditioning must be in place in all bedrooms and lounge areas. For rentals from May to September a cooling system must be available. For rentals from October to April a heating system must be available. If your property is listed as of “cultural interest” or building/modification work is prohibited, then your property is exempt from this item.
  5. Properties must contain a fully stocked medical/first aid kit.
  6. Information about local amenities must be made available for tenants. These should include details of local shops, restaurants, parking, medical facilities and public transport, etc.
  7. A complaints/claims book must be made available to tenants.
  8. Properties must be cleaned before check-in and after check out of clients.
  9. Bedding, towels and other household good must be provided, along with spares.
  10. A contact number should be available for tenants to answer questions or resolve issues regarding the rental.
  11. Information/instructions must be provided for all electrical appliances.
  12. Rules and regulations regarding the property and/or the urbanisation must be provided. These include rules regarding smoking, music, pool access etc.

 Ok, I’ve got that. How do I register?

As the owner of the property it is your responsibility to ensure your property is in-line with the new requirements and is registered with the authorities.

To do this you must submit a statement to the Ministry for Tourism confirming the property is compliant. Once submitted you can accept clients immediately. The minimum details you are required to submit are:

  • Property Details: Catastral Number and Maximum capacity (as stated on the license of occupation)
  • Your details: Whether you are an Individual or a Company, along with contact information.

Once you have registered you will receive a registration number which must be included on all promotional/advertising material.

The registry must then be informed of all rental activity in your property. This includes details of commencement and cessation of rentals.

How do I go about my rental business now?

There is now a long list of things you now have to do to legally handle your rental clients:

  1. All of your clients must be presented with a document, by way of contract, that provides your details, the registration number provided by the Registry of Tourism, the tenants details along with the details of their stay, including the price, and a contact number.
  2. All of your tenants must provide you with identification to enable you to register details of their stay. This brings private rentals in-line with the registry process when staying in any other recognised hotel or similar.
  3. You must agree arrival and departure times with your tenants prior to their arrival. If you do not, the arrival time will be assumed to be 16:00 and departure time will be 12:00.
  4. At the point of check-in, the clients must be provided with keys or access cards to allow them entry to all points of the property/urbanisation. You should also provide details of any rules regarding the community/urbanisation.
  5. Instructions for all the appliances within the property must also be made available.
  6. When advertising your property, it must be priced per night and the price must include utilities (water, electricity, cleaning and bedding). There is no restriction on the number of nights.
  7. Final price, dates etc must be provided in writing before confirmation of any booking. If an advance payment is made, a written receipt must be provided for the tenant.
  8. You may request an advance payment as a deposit up to a maximum of 30% of the total rental cost, unless a different amount is previously agreed with the tenant.

Cancellation

  • If the tenant cancels the booking within 10 days of the commencement of the rental, then the owner may retain the deposit in full.
  • If the tenant cancels the booking more than 10 days before the commencement of the rental, then the owner may retain up to 50% of the deposit.
  • If the owner cancels the booking more than 10 days before the commencement of the rental the tenant must receive a refund of the entire deposit.
  • If the owner cancels the booking within 10 days before the commencement of the rental the tenant must compensate the tenant with up to 30% of the contracted price of the entire stay.

Force Majeure

If the rental is cancelled by either party for substantiated reason or force majeure, no compensation will be due to either side.

 Deadline and Sanctions

Don’t panic! The decree was only published last week so you have a little time to prepare. Registration will open three months from publication, which was Feb 11th. This takes us to May 11th, 2016. From this date we believe you will have three months in which to register your property. You then have 12 months to ensure your property is fully compliant.

If you rent out your property without registering or before your property is fully compliant then you are liable to be fined. Maximum fines are stated as 180,000€.

Landlords – beware of the law or face fines

Follow the rules or face fines
Follow the rules or face fines

Property owners who rent their property out are being warned that they must abide by the law or face the possibility of stiff fines being imposed.

The British Embassy in Spain say they have been made aware of a number of cases in which landlords who failed to declare rental income or have incorrect permits have been fined up to €30,000.

It is thought that up to 70% of rental properties in Spain are not being declared meaning billions in tax revenue is not being collected by the treasury.

The British Embassy has released advice for home owners who are, or are thinking about, renting out their property in Spain.

Short-term lets

The regulations on letting tourist apartments (apartamentos turisticos) and holiday homes (viviendas vacacionales) vary by region. If you are planning on making a financial return by renting out your existing property, or buying one to let, you are recommended to seek independent legal advice and check the local licensing laws with your local town hall (Ayuntamiento).

This is particularly important in Catalonia, the Balearic Islands and Canary Islands where the rental of holiday properties on a short-term basis is strictly regulated. The authorities in these areas are cracking down on homeowners who rent out their properties to tourists (particularly through online adverts) without complying with Spanish law.

If you own or are planning to buy an apartment which is part of a Comunidad de Propietarios (Committees of property owners who are responsible for the management of communal areas of apartment buildings/complexes), you should also check whether there are any rules that prohibit or restrict short-term letting.

Long-term lets

Owners who rent out properties on a long-term basis are generally not required to apply for a special licence. However, it is worth seeking professional advice to make sure that you are complying with Spanish legislation and that you are using the correct rental contract.

There are different types of contracts depending on how long the property is being let for, such as arriendos de vivienda which are for a minimum of five years, and arriendos de temporada which are generally for one year or less.  You can get copies of these contracts from tobacconists (estancos).

Taxes

Owners of properties should also be aware that whether or not you are resident in Spain, you will need to declare rental income to the Spanish tax authorities. Homeowners may wish to seek advice from a professional tax adviser (asesor/gestor).

Managing a property rental

You may want to consider hiring a Spanish letting agent to assist with finding tenants, drawing up rental contracts and managing the property on your behalf.

FAQs on letting property in Spain (in Spanish) from the Sociedad Pública de Alquiler (Public Rental Society) 

Further information can be found on the UK In Spain website.

Rental costs increased in April

According to figures from the National Statistics Institute, the cost of renting a property in Spain increased by 0.7% in April, compared to the same month in 2011. However, there was no change compared to the previous month.

The increase was 1.4 points below the overall CPI which stood at 2.1% in April.

There were only two regions where rental prices decreased. They were Murcia and La Rioja where rental costs decreased by 1.2% and 0.3% respectively.

The region that saw the greatest increase was Catalonia where an increase of 1.4% was recorded. The Basque Country and Asturias followed, both recording an increase of 1.2%.

Andalucia saw an increase of 0.8% while Melilla and Ceuta (Spanish territories in North Africa) both registered a 0.7% increase. Madrid saw a small increase in rental costs of 0.2%.

By province Alicante saw a fall in rental costs with a -1.1% change. The largest increase by province was seen in Palencia with 1.7%, while León, Granada and Barcelona all registered an increase of 1.6%.

Hacienda to collect millions from undisclosed landlords

lost revenue
Hoping to raise millions from "secret rent"

Spain’s treasury, or Hacienda, is trying to collect millions in tax from the undisclosed income from more than one million rented properties, according to figures released by the Spanish union of tax inspectors, Gestha.

There are thought to be over one million properties being rented out where the owner is not declaring the rental income, and therefore not paying the relevant taxes.

The hacienda hopes to collaborate with the electricity companies to monitor how much power is being consumed in a property. The power companies will also disclose to the government details of the bank accounts associated with the electricity supply.

The hope is that the collaboration will help to detect homes and shops showing signs of daily use by people other than the owner.

“It is a good way of boosting rentals and increasing state revenue.” said Manuel Gandarias, director of Pisos.com.

“It is more than likely that the announcement will have a greater impact than the measure itself with ‘black’ rents coming to the surface as more owners come clean.”

The average rent for tenants in Spain is €628 for a property of 95m² suggesting that the undisclosed rentals are netting their owners more than 7,500 million euros.

With the number of rented properties increasing due to the crisis and high unemployment this amount is likely to increase this year. Rentals are up 5% since 2010 and still rising.

Holiday makers want more than just a break

Flamenco dancers
Spanish culture attracts tourists

Many people buy a property in Spain with the intention of renting it out to holiday makers and while this market is staying afloat it is changing and property owners need to adapt.

This is the opinion of the founder of Campaya Holiday Rentals, Claus Pedersen. He claims that many properties in Spain are set up for tourists who want a standard two-week holiday on the coast, but he added that travellers’ priorities are changing.

He commented that catering for the rental market “may not be enough to make your property stand out and attract the more niche-minded tourist”.

Campaya noted that cultural tourism is on the increase with many travellers more keen than ever to learn about the area in which they are staying and to have a more authentic or traditional experience.

The organisation has advised anyone considering purchasing a property to let in Spain to try and cater for more than just one demographic.

With so many properties for rent on the coast it is important to remember that if you’re property isn’t exactly right, the holiday maker will have a huge choice of other properties that may be. If you want your rental property to be rented then it must be attractive for the holiday maker – not just in terms of size but location, facilities and of course price.

Rental prices increase

Rental PropertyAccording to figures released by the National Statistics Institute (INE) the average price of renting a property in Spain increased by 0.9% during November, compared to the same month in 2010.

The increase in rental prices remains two points below the overall CPI which was at 2.9% by month end, reported El Mundo. Month-on-month, rental costs registered a variation of one tenth, which had risen this year by 0.8%.

In Navarre, the only region to register a decrease in rental costs, the average fell by 0.4%. The largest increase was in the Basque Country which registered an increase of 1.6%, followed by a 1.3% increase in Catalonia. An increase of 1.1% was registered in both Asturias and Galicia, followed closely by 1% increases in Andalusia, Cantabria, Castilla-La Mancha and Castilla y Leon

Surprisingly the costs in Madrid only increased by a mere 0.3%, while Murcia and La Rioja saw an even smaller increase of only 0.1%.

3 Bed Apartment For Rent, Puerto Banus

3 Bed Apartment For Rent, Puerto Banus – Ref: R376197

Property For Rent in Puerto Banus
3 bedroom Ground floor luxury apartment set in an exclusive urbanisation. Walking distance to Puerto Banús with its prestigious international boutiques, restaurants and shopping centres not to mention the incredible night life.

The bedrooms are all en suite. The sitting room and dining room are decorated and furnished in a classical Mediterranean style and the kitchens are truly fully equipped to the highest standards as you would expect.

Price: €2,500 /month
Setting: Port, Close To Golf, Close To Port, Close To Shops, Close To Sea, Urbanisation
Orientation: South
Condition: Excellent
Pool: Communal
Climate Control: Air Conditioning, Hot A/C, U/F Heating
Views: Garden, Pool
Features: Fitted Wardrobes, Near Transport, Private Terrace, Satellite TV, ADSL, Gym, Paddle Tennis, Tennis Court, Ensuite Bathroom, Marble Flooring, Jacuzzi, Double Glazing, 24 Hour Reception, Restaurant On Site
Furniture: Fully Furnished
Kitchen: Fully Fitted
Garden: Communal
Security: Gated Complex, Entry Phone, 24 Hour Security
Parking: Underground
Category: Holiday Homes, Luxury, Resale

Ref: R376197
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