When it comes to investments in Barcelona, the Spanish city is definitely a great location, considering its temperate climate, striking coastlines and vibrant culture.
2016 saw no less than 28% of the total property sale transactions in Spain for the pure purpose of investments. However, the fact that there was a high demand yet a comparatively lower supply for residential properties in Barcelona caused a 16,5% rise in rental prices.
Landlords looking to rent out properties have a choice of short-, mid- and long term rentals. Long-term rentals seem to be quite the popular choice, seeing as it can ensure a stable income, cost less in terms of advertising and agency expenses, cancel out changeover fees, and are less likely to be damaged by the occupants.
Rental yields refer to the rate of income return over the cost associated with an investment property, and is usually expressed as a percentage. Rental yields increase as soon as rents go up relative to housing prices; likewise, they decrease when the opposite happens.
But what makes up rental yields? They are the product of complex features such as housing supply and demand, legislation, culture, market efficiency, incomes and fiscal policy. According to idealista.com, the average rental yield in Barcelona is 5,9%.
Seeing as Barcelona provides an abundance of benefits to residents, finding a long-term tenant in the city is not hard – the right property in the right location will be scooped up quite quickly, obviously enhancing investments in Barcelona. This was most definitely true in 2016, when the average period of finding a tenant decreased from 46 to 30 days.
Another important point to note is that landlords’ powers are increasing, as property price negotiations seem to become a thing of the past.
A landlord letting a property in Spain as a holiday rental (which is three months or less) or a short-term lease (12 months or less) must have the appropriate licence. But when it comes to long-term rentals (more than one year), no licence is required.
Many landlords go with the latter option. The average long-term lease provides the tenant with the automatic right to annual renewal for up to five years. Only in rare and special cases can the tenant be evicted or given notice to vacate. Should the tenant decide to leave halfway through the year, they still need to pay the first full 12-month amount.
Should the landlord set up an agreement with letting agencies to rent out their property, the tenant will be liable for the costs, which is usually up to 10% of the annual rent. The tenant is also held accountable for the property’s deposit, payable to the landlord.
In addition, one month’s deposit, paid by the tenant, goes toward INCASÒL, a public body of the Government of Catalonia. This is to officially register the letting contract and protect the rights of all the parties involved. This amount is refunded back to the tenant after the contract’s termination.
Regarding income tax for non-residents who rent out their property: the tax base is the net rent, with expense deductions allowed (as of 01/01/2010). For 2016, the tax rate was 19% for residents of the European Union, Iceland and Norway, and 24% for the rest.
Another tax to be paid by the owner of a Spanish property, regardless of their residential status, is IBI (Impuesto sobre bienes inmuebles urbana / rustica). This property tax is based on the cadastral value of the property, and usually varies from 0.405% to 1.166%, depending on the region. In Barcelona, the rate is around 0,825%, yet varies per district, which means it can be anywhere between 400€ and 2000€.
Maintenance of property
For their Spanish property’s maintenance, the landlord is subject to community fees, which is geared toward road cleaning; green zone maintenance (including communal and possibly private gardens); cleaning, decoration and upkeep of buildings; a caretaker (janitor); communal lighting in buildings and grounds; water supply (e.g. swimming pools, gardens); insurance; administration fees; urbanisation rates; maintenance of radio and television aerials and satellite TV charges.
Fees are divided among owners according to the share of the utility allocated to each property. The monthly amount to be paid can vary from 50€ to 250€.
Tenants are responsible for the surplus costs such as gas, water, electricity, Internet connectivity, and small repairs during the rental period (except during the first 15 days). Depending on the size of the apartment, these costs can range from 50€ to 250€ per month.
What and where to buy
All owners want to see a successful return on investment from their buy-to-let properties, and to ensure this, multiple factors need to be taken into account – with the most important one being ‘location’.
If a long-term tenant is what you are seeking, an apartment located in the city centre is a sensible option; for example, a one- or two-bedroom property in central Barcelona (such as Ciutat Vella or Eixample) rent extremely well, seeing as there is a short supply married with MBA students, foreigners and an influx of young professionals.
The demand for rental properties is quite strong up to around 1,200 € per month, yet drops rapidly above that. However, growing foreign demand in specific areas of the city, such as Eixample Dreta, is less sensitive to pricing.
Another region, Zona Alta, is mostly occupied by local families and sees a higher demand in more spacious, unfurnished apartments.
When it comes to purchasing a foreign home or apartment, three types of investors, each with their own investment property type, can be identified:
- Those who require maximum income;
- Those who seek a good income, yet want the property to be situated in a superior location with the intention to use it themselves occasionally;
- Those who want to use the property more frequently, but still want it to generate an income when not in use by them.
As a specialist in Barcelona real estate investments, Sivoris is up to date with the local market and is quite experienced when it comes to property values, rental incomes, management, financing queries and legal issues. In addition, we know that a client who is happy with their property investment is likely to buy again, which is why enhancing customer satisfaction is a day-to-day undertaking.