Over the last seven years, one of the finest, if not the greatest, businesses in Spain has been buying a property to rent it out, specifically as a vacation home (short-term).
Property values in Spain have risen substantially post-pandemic since 2020, with an 8.5% Y-O-Y capital appreciation across the board in coastal areas and important Spanish cities. Spain’s property prices rose in the last 11 months in a row, reaching all-time highs.
Furthermore, rental yields have increased by two digits year on year for 3 consecutive years! Spain is presently the world’s second most popular tourist destination, after only the United States of America.
Investing in Spain now appears to be more appealing than ever. According to Fotocasa, the gross rental yield is 6.5% while a net rental yield of 4.5% per year is to be expected. The combination of capital appreciation and rising rental income results in a total safe net yield of more than 10% per year!
Despite interest rate swings, Spanish real estate is destined for combined two-digit increases over the next few years, easily outperforming alternative products (bonds, commodities, cryptocurrencies, and gold).
When it comes to taxes, they are some tax advantages for resident and non-resident landlords. Roughly 60% in tax deduction can be granted on income derived from housing rentals under Spain’s “la Ley del IRPF” personal income tax law. Unfortunately, this reduction does not apply to non-residents according to article 24.1 of the IRNR Law. However, tax breaks can be provided to all non-residents for both short-term and long-term rentals.