Is buying a holiday property in Spain a good investment?

May 2024

You’ve got a bit of money to invest, and you’re looking for a good purchase. How about buying a holiday home in Spain? As with any investment decision, it’s important to go in with your eyes open. The good news is that a Spanish holiday home can indeed be a wise investment, but you’ll need to be careful.

The profitability of a holiday home in Spain

In general, a holiday rental in Spain is a good choice if you want to invest. Spanish properties are usually significantly cheaper than their northern European equivalents, even in trendy areas. The property market has proved surprisingly resilient, too, perhaps thanks to Spain’s always-booming tourist sector. 

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Location, location, location

This is one of the most crucial considerations when you’re buying a holiday home from the UK. How well do you know the area in which you’re investing? There are some areas that are already extremely popular, such as Costa del Sol, Costa Brava or Costa Blanca. You can expect regular rental customers there, complete with high returns. However, you may find more profitability if you scout out up-and-coming destinations.

Looking for a holiday home in the Spanish language can be quite tricky. It certainly helps if you have local help in the form of someone who not only speaks the lingo but can also assist you in finding good areas to buy.

You’ll also want to think about the type of property you’re interested in. An apartment in a desirable city centre may have visitors all year round, but they’ll likely only want to stay for a weekend or a few days. On the other hand, a villa with a swimming pool is likely to be popular with holidaymakers who want to stay for longer periods, although it may get less attention in the winter months.

Finally, think about whether you’re planning to use your new holiday home for your own personal getaways as well as for rental income. If this is the case, then make sure you’re buying in a location that you actually like. After all, you’ll be going back there time and time again.

The pitfalls of buying property in Spain

This might sound very rosy, but take care. There are several potential hazards that can see your dream holiday home turn into a money trap. Here are some questions to ask your lawyer before you proceed:

• What are the local restrictions on holiday homes? This will depend entirely on the area. Some cities, such as Palma de Mallorca and Barcelona, are trying to restrict short-term rentals and even clamping down on holiday rental portals like Airbnb. As soon as you advertise your property on a holiday rental website, you may be slapped with a steep fine.
• How easy is it to get a holiday rental licence? Again, this is very location-dependent. Some regions and cities of Spain have a generous number of licences available, while others are strictly limited.
• Does the property meet the local minimum standards to be a holiday let? Apart from the standard health and safety features you might expect, different regions set their own requirements. For example, in colder parts of the country, you may be expected to have central heating in a holiday rental, while warmer areas might require air conditioning.

You’ll also want to make sure you have a full property survey before you sign on the dotted line. This can help you identify any nasty — and costly — surprises, such as construction issues.

Finally, it’s worth considering just how long you expect your property to stand empty each year. In recent years, Spain has seen a growing problem with squatters occupying properties, particularly holiday rentals that are between customers. If squatters enter your property, Spanish law makes it extremely difficult to evict them. You should prepare yourself with a plan in mind about how you’ll prevent unwanted guests from showing up.

Running a Spanish holiday home from another country

Buying a holiday rental in Spain isn’t quite as simple as handing over your cash and putting up a “rent my holiday home” ad. You’ll have to consider the running costs involved. In Spain, you’ll need to pay property taxes, utility bills and community fees.

You may also want to hire someone to look after your property on the ground. In a popular tourist area, you’ll likely find plenty of options for professional companies who manage holiday lets. They’ll be able to take care of day-to-day problems, deal with guests, and so on. If you don’t live in Spain permanently, you might find that their assistance is invaluable.

Finally, consider how you’re going to advertise your holiday home. A property management company may be able to help here, but there are also lots of online portals that you can use. 

The B word: buying a house in Spain from the UK

One question on everyone’s lips is simple: how has Brexit changed the process of buying property in Spain for British citizens?

There’s some good news and bad news here. First, the good news: things haven’t changed all that much. Yes, British citizens are now non-EU, but the actual process of buying a property remains the same. However, there are two important things to take into account.

Firstly, the amount of time you can spend in your holiday home is limited. You are only able to spend a maximum of 90 out of 180 days in Spain, which may scupper your plans if you were hoping to use your new property as a second home. Secondly, there are tax implications. As a non-EU citizen, if you plan to rent out your new property, you’ll face a tax of 24% on rental income. There is no allowance available for expense deductibles, so keep this in mind when you are making your budget.

What’s more, you’ll face higher taxes if and when you decide to sell your holiday rental. Spanish capital gains tax is set at 19% for EU citizens, but as a non-EU citizen, you’ll need to pay 24%.

Even with these tax implications, you might feel that buying a property in Spain is still a good investment. It’s worth finding a Spanish lawyer who specialises in working with foreigners, as they’ll be able to guide you through every step of the process. With any luck, you’ll enjoy a profitable rental for years to come.

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