Is renting your house as a holiday let still a viable option part 6 - General property discussion in Playa Flamenca - Playa Flamenca forum - Costa Blanca forum in the Alicante province of Spain
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Is renting your house as a holiday let still a viable option part 6

Davebev1Posted by Davebev1 on Sat Oct 13, 2018 12:03pm
5 replies441 views4 members subscribed

Part six – my thoughts on the future of the holiday let market

Predicting the future is not something I would consider my forte, but as an owner you are always looking ahead at least a year (or should be).  The licensing was introduced because the massively influential hotel lobby felt self-catering lets were undercutting their businesses, especially when the good times came to an abrupt holt in 2008/9.  In fact, if the financial crisis hadn’t happened I suspect we would not be where we are today with rental legalities. The crisis highlighted to the Spanish government that they were missing out on millions in unpaid tax on undeclared income and that combined with pressure from the hotel lobby was the catalyst for licenses.

Neither of these factors is going to change – hotels will continue to insist on tighter controls for their ‘competition’ and the government will continue to want to receive tax revenues.  So where will it go from here?

Some owners will find they can’t let legally as their property isn’t suitable.  Changes that have been made without proper permissions will start to be picked up as inspections become a more integrated part of the process.  At some point I feel there will be an introduction of re-inspections of already licensed homes, maybe every 3 years or so, with some sort of cross-checking of information between government departments, but that is still some way off.

Some owners have already said it isn’t worth the ‘hassle’ of going legal, they have either foregone the rental income or are selling up.  Some will continue to rent under the radar, but there are checks that tax inspectors can make so sooner or later they will either be caught, or someone will report them.  Remember the fines can go into tens of thousands of Euros. A fine can be big enough to require you to sell the property!

So, are there benefits to owners?  Yes. For those that have always tried to be legal there is now a level playing field.  We all have to meet certain standards, certain criteria, and we all have to pay our taxes.    In theory this will weed out in time from the system those who gave the holiday let market a poor name through badly managed and poorly maintained property.  I have noticed a marked increase already in weekly rental costs as owners have increased prices to take into account tax payable, I suspect that upward trend will continue for another year or so as people readjust to their income:cost ratio.  Having to register your guests’ passport details with the Guardia Civil will also bring a degree of security and comeback for the owner – we have never had groups of stags and hens or students but those who have say they often paid the price in problems caused but because they did not obtain the full details of the renter and had no contract, all they could do was retain the damages deposit, assuming they had the sense to take one.

Owners need to be organised – booking forms, contracts, passport details, proper book-keeping and tax returns.  Staying on top of new rules and regulations is the tricky part as some changes are very sudden and not necessarily that well publicised.

With Town Hall now involved in the early stage of obtaining the license I suspect, under pressure from the hotel lobby, that in some areas, maybe in time all areas, the number of new licenses issued will be restricted.  This has happened on the Spanish islands already and is probably the reason why the new earlier stage with Town Halls in the application system has been introduced. How soon that will happen will be down to the individual Town Halls.  

In any business supply:demand ratio influences price, so fewer available rentals and high demand will eventually increase prices further, but owners must not get ‘greedy’ or people will just look at alternative locations.  It will be a balancing act and for owners a very steep learning curve as we all try to stay on top of the regulations.

Remember this is a blog, not legal advice, so I strongly recommend that you speak to your legal team if you have concerns or are worried about your compliance with the new laws.  Renting out your holiday home was never meant to be stressful or difficult, and some owners will find the new rules just too much to deal with and stop renting or even sell up. But if you love your dream home in the sun then filling out a few forms and getting organised can still have its rewards.

So, in conclusion, do we think it is still viable to rent out to the holiday market?  A resounding YES! But keep it legal!


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Written by

Davebev1

Davebev1

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Posts: 739

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Location: Playa Flamenca

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bobbyboy

Posted: Tue Feb 12, 2019 4:58pm

Posts: 34

11 helpful points

Location: Torrevieja

Joined: 19 Dec 2018

Posted: Tue Feb 12, 2019 4:58pm

What a fantastic amount of useful information you have provided. We have applied and are now in the early stages of awaiting our licences. We look forward to letting out our property with all the legal issues in place. Thanks again for all the eye opening information you have provided 

paulrudd5

Posted: Mon Mar 18, 2019 2:45pm

Posts: 51

23 helpful points

Location: Elda

Joined: 4 Mar 2019

Posted: Mon Mar 18, 2019 2:45pm

Thank you for a great series of renting guides, they have been very useful in our early consideration of renting. We were planning of developing a self-catering business using wooden lodges built for purpose on the property we eventually purchase. Whilst the planning permission for wooden lodges may be less draconian, the Capability and Tourism licensing will I am sure be the same and I do have our solicitor looking into the 'local' (Town Hall) regulations before purchasing a property.

Great job and thanks again.

Davebev1

Posted: Mon Mar 18, 2019 3:08pm

Davebev1

Original Poster

Very helpful member

Posts: 739

835 helpful points

Location: Playa Flamenca

Joined: 7 Nov 2017

Posted: Mon Mar 18, 2019 3:08pm

Thank you.  Good luck.  Yes, sensible and important that you have a fully independent solicitor check everything first to ensure your project will get the go-ahead.

Despegue

Posted: Mon Sep 23, 2019 7:37pm

Despegue

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Posts: 105

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Location: Orihuela Costa

Joined: 23 Sep 2019

Posted: Mon Sep 23, 2019 7:37pm

Very good advice so thank you so much!

In the other hand, taxing 19% is pure robbery and a guarantee that many will not declare all rentals to the guardia civil and taxman, and you know what, I do not blame them.

Davebev1

Posted: Mon Sep 23, 2019 11:17pm

Davebev1

Original Poster

Very helpful member

Posts: 739

835 helpful points

Location: Playa Flamenca

Joined: 7 Nov 2017

Posted: Mon Sep 23, 2019 11:17pm

Despegue wrote on Mon Sep 23, 2019 7:37pm:

Very good advice so thank you so much!

In the other hand, taxing 19% is pure robbery and a guarantee that many will not declare all rentals to the guardia civil and taxman, and you know what, I do not blame them.

Tax is tax, if you owe it you have to pay it.  If you earn money from renting out property in the UK then you would expect to pay the relevant tax on that income in the UK, and if you don't you face the consequences when caught.  Evading tax is a criminal offense in the UK and carries a prison sentence for deliberately filing fraudulent tax returns, so people are lucky that the Spanish authorities only fine people who are caught not declaring their rental income.  If you think 19% net (ie after allowable deductions) is high then maybe I should mention that the rate payable by those residents of non-EU countries is 24% with no allowable deductions - so if brexit happens then the tax rate goes up to 24% gross for all British residents who rent out their holiday homes!   

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