TIPS ABOUT RENT MARKET IN THE CANARY ISLANDS

TIPS ABOUT RENT MARKET IN THE CANARY ISLANDS

If you want to know more about renting out or invest in a property as a Vivienda Vacacional, please stay in touch. I run a full property management service that includes maintenance, online advertising, bookings, guest relations and cleaning.  If you are ready just let me know and I will help you in the best way that I can I offer a full rental services package for anyone with a Property. Feel free to ask any questions you might have. Just send me a message using my contact on this page.

SUPPLY AND DEMAND

Tourism in Canary islands is booming but it isn’t infinite. There will come a point where even the growing number of tourists can’t fill all the rental apartments that pop up. When the holiday rental market hits saturation, occupancy levels and rental yield will fall in the sectors with the most supply. Studios and one-bedroom apartments are the most common property type, and the cheapest to refurbish for short-term rental. I’d expect them to hit saturation point first.

Just because there’s are lots of rentals on the market, doesn’t mean that you can’t get a good yield. Buy the right property, decorate it well, and market it right is a great investment. For a start, Spanish property prices are forecast to rise slowly over the next decade, but rise fast for holidays homes investiment. With high demand and a lack of new property. The key to earning a decent holiday rental yield is to make sure that your property stands out; it needs a hook to make potential renters choose it over competing apartments. So, How to make your holiday rental property pop to make sure that your tourist rental property stands out and gets booked?.

The beachfront is always the location going to be popular because of the view and because the supply of apartments is limited. But, property prices are high so most buyers look just behind the beach. Here, demand is still high, but you do have to do a bit more to attract tenants because there is far more competition. Apartments in, especially those with period features like balconies, high ceilings and original floors, are also in high demand. And top floor properties all over the city rent well, especially if they have outside space. Most visitors come for the climate so they want to be able to enjoy it as much as possible. This is why any property with outside space has an advantage.

The space doesn’t have to be a large terrace; a balcony, open roof, or a private internal courtyard are good too, provided that they well-decorated and look inviting in the photos. Given the choice between two similar apartments, almost everyone will choose the one with outside space.

Decorate with style and buy basic, modern furniture to decorate your tourist rental. For properties that are well-located or have a great outside space, However, if your tourist rental property is in an area with lots of competition, you’ll need to think beyond basic to future-proof your yield. Find some great art for the walls, choose original furniture, give your property a decorative theme. Anything that make it stand out from the beige.

Target a niche: Not everyone who comes to Canary Islands is here for a week or two week holiday. The Islands attracts business people, surfers, divers, language students, etc. So, if your property is close to the surf breaks, consider putting in surfboard storage. If you want to attract business people, provide fast internet access, a business center walk around, and a decent meeting points.

Think beyond the fortnight, actually has a severe shortage of property that is available for rent for periods of between two weeks and six months. It’s because most tourist rental property is too expensive for a stay that goes beyond a week or two, and most residential landlords won’t take tenants for less than six months. This makes life difficult for ERASMUS students, digital nomads, language students and even Scandinavian winter visitors who want to spend a few months escaping the cold. And it’s an opportunity for rental investors. Target this niche and you’ll make less per night, but you’ll avoid empty periods as well. Success depends on making contacts in the nomad, co-working and language school scenes in the main cities.

WHAT ABOUT BUYING AS INVESTOR IN HOLIDAY RENTAL

The vivienda vacacional or holiday rental rules in Canary Islands are under laws, letting websites like Airbnb and Homeaway and holiday rental managers, have to inform the AEAT, the Spanish Tax Agency of all holiday lets. This must be done via form 179: The “declaración informativa de la cesión de uso de viviendas con fines turísticos”. Form 179 must be handed in every three months within a month of the end of the quarter (For example, you’d hand it in during April for the trimester covering January to March).

WHAT YOU HAVE TO DECLARE

Form 179, when ready, will require the following information about each booking.

a) ID (NIE) of the property owner and the holiday let exploiter (if different). If the owner rents to a rental agent at a set fee, both would need to be identified.

b) Property ID number: The number from the property’s vivienda vacacional paperwork.

c) ID of all guests plus the number of days they stayed at the property.

d) Amount of money received by the owner or letting agent. Free stays must also be declared.

WHAT DOES THIS MEAN FOR CANARY HOLIDAY RENTALS?

Basically, the Spanish taxman is making sure that it gets its cut of all holiday rental profits. From now on, all owners or holiday rental managers are in charge of telling the taxman who stayed at their properties and how much they spent. Don’t forget that you also have to pay your IGIC tax to the Canarian tax authorities if you are renting on a short-term basis.

How to future-proof your holiday rental investment& guarantee occupancy and yield. The holiday rental market is booming as owners pile in chasing juicy, short-term rental yields. But, the time will come when supply exceeds demand and yields drop. It’s why I advise all rental property owners to future-proof their investment now.

The holiday rental boom. Now that short-term rental is legal in Las Palmas, the number of properties advertised on portals like Airbnb and Booking.com is going up by the day. Estate agents are following the trend and every apartment within walking distance of the beachs is now labelled as ‘an ideal rental opportunity’. the number of apartments in the market is growing so fast that it’s even pushing up residential rents in the islands.

HERE’S MY GUIDE TO EVERYTHING YOU NEED TO KNOW ABOUT RENTING OUT YOUR PROPERTY.

You own a Property but you don’t use it all-year-round. Or you want to buy a property in the city as a buy-to-let investment. How do you earn a good yield with rental property?

Residential rentals in the cities. This is the easiest way to make money from property rental in the city, but it also yields the least income. A one-bedroom apartment in the city rents for between 400-700 euros per month depending on location and standards (less away from the beach). A two-bed flat in rents for 700-900 euros, again depending on location and how it is decorated and equipped. A two-bed beachfront apartment with a terrace costs a lot more to rent.

Contract: Most long-term owners insist on a minimum contract of 12-months, although the law only recognises a six-month minimum. Tenants have to leave a one-month deposit which you return when they leave (but not if they leave early). Spanish law used to be skewed heavily in favour of tenants but is now fairer. The Consumer Association provides a model rental contract that is legally up-to-date.

Utilities: It’s best to have the light and water in your name, pay the bill, and get your tenant to pay you. Cutting off the light and water between tenants is a pain as reconnecting them takes time and is expensive.

Estate agencies charge one month’s rent to find you a tenant and provide the rental contract. This is paid by the tenant, although some agencies ask the property owner to pay half of it (when are between business contract). If you’d rather rent your apartment independently, put it on Internet. You will get called by agencies.

Renting your property to tourists on a weekly or short-term basis is perfectly legal. Canarian law changed in 2015 and only bans short-term rentals in areas designated as resorts. Since is all residential you can rent out any property (that has the basic paperwork). You don’t need permission from the communidad of owners to rent out a apartment unless a majority of the owners have voted to ban it.

Mid-term rentals. There is demand, especially in the winter, for rentals that fall between long-term residential lets and tourist rentals. The typical tenants are retired Scandinavians, Germans or Brits who spend several months in to avoid the cold at home. A growing number of digital nomads also spend weeks or months in and want medium-term rentals.

Most Spanish property owners won’t consider renting their residential property for less than a year, even though they can charge more per month. The rental income from medium term lets is somewhere between residential and touristic rentals. This type of contract is called a “Contrato de Alquiler por Temporada”.

PAYING TAX ON RENTAL INCOME

The tax implications of renting your apartment depend on whether you are resident or non-resident and whether you rent residentially or touristically. Canarians residents have to declare the income on their annual tax return and pay the corresponding income tax. Non-residents pay a flat tax on income that is earned in Spain. This includes the income from short-term rentals. It is currently 19% for EU citizens (plus Norway and Iceland) and 24% for everyone else.

If you rent your property to tourists, you need to be registered for the 7% IGIC tax (Canarian VAT) and declare it every three months. Non-residents would need to read this article and talk to their accountant about tax. All European countries have double-taxation treaties with Spain so you don’t have to pay tax twice.

RENTAL SERVICES

Non-residents need a rental service provider, especially for holiday rentals. Things like delivering keys, arranging for cleaning between guests, and troubleshooting. Rental service providers charge a percentage of the bookings. The amount depends on what they do for you. The fee ranges from 10% to 30%. At the lower end of the scale, everything tends to be done in cash and via word of mouth. At 30% you’d expect the company to handle the entire process including taking bookings and paying for all repairs and maintenance. Providers that charge 20-25% are the best value as they handle advertising, bookings, keys, cleaning and guest relations, as well as arranging for any repairs and maintenance. You need a provider that can handle enquiries promptly in the main European languages, greets guests with keys, deals with any questions of complaints, and makes sure that your property is looked after.

PROPERTY SERVICES

The most important thing is to decide which type of rental best suits your property. Not all Property makes a good tourist rental and often you can make a better return with mid-term or residential lets. Always get independent local advice about the best areas and property types before you buy a rental investment flat.

GETTING YOUR HOLIDAY RENTAL PROPERTY PAPERWORK

Getting a permit. To rent your property in Las Palmas, you need to go to the island’s Tourist Board (Patronato de Turismo) and get a permit and plaque for the door. All you need to get the permit is proof of ownership, the cedula de habitabilidad (or equivalent document) which proves that the property is built to legal standards, and to sign a document promising to advertise your property honestly and pay tax. There is no inspection of your property and, provided you have all the paperwork,.

It is easy to get a permit, takes two weeks to arrive and you have to pick it up from the Patronato de Turismo. There is no inspection of your property but you do have to put up the plaque and put your license number in any advert. The best places to advertise are large portals like Airbnb and Booking.

The paper chase: Cédula de habitabilidad, certificado de primera ocupación or a declaración responsable. If you have one of these three papers, you can get a Vivienda Vacacional license from the Patronato de Turismo If you don’t have one of the documents, you have to get one. There are three ways to do it…

A duplicate cédula de habitabilidad: This certificate was handed out when your house was first finished and declared habitable. Most owners threw them away as they weren’t needed for anything. To get a duplicate cédula, you go to the Consejeria de Viviendas with a copy of the escritura and a copy of your ID. You fill in a form, hand it all in and wait about four months.

If your property was built between 2003 and 2011, then you apply for a duplicate cédula at the Ayuntamiento rather than the Consejería de Viviendas. If your property was completed after 2011, you won’t have a cédula as replaced them with a declaración responsable issued by the builder or promoter.

A duplicate certificado de primera ocupación, A certificate issued when a property is first lived in. Everyone threw them away s they were pointless. Get a duplicate in the Ayuntamiento by filling in a form and giving it along with a copy of your ID and a copy of your escritura. The wait is currently months rather than weeks. This document was also abolished within on 2011 and replaced with a declaración responsable provided by the builder or promoter.

Getting a declaración responsable. This certificate done by an architect states that your property is suitable for rental and conforms to all legal building standards. It involves an inspection and a report, takes a week or two and costs around 300 euros. You then have to hand it in to your Ayuntamiento and wait a few days or weeks for it to be stamped and approved. Almost all properties qualify although you have to be careful in old buildings with narrow staircases and no lift. A declaración responsable is the only way of getting your holiday rental license if you don’t have the papers and can’t get duplicates.

Anyone can apply for these documents in your name provided that they have a copy of your ID and a signed poder (authorization document). A third party can also hand in the Vivienda Vacacional license application with a poder and copy of your ID. However, you will have to sign the application form, or get a noratized poder to allow your representative to do it for you.

So, Getting a holiday rental license its in theory very simple. To issue a license, the Patronato needs one of three bits of paper that are deemed to certify that your property is suitable for tourist rentals. Get the papers you need to apply for a tourist rental license and rent out your property legally. All you need to do is go to the island’s main tourism office (Patronato de Turismo) There, you fill in a simple form, hand in some and some paperwork and wait a couple of weeks. If you’ve got all the documents, the process is a formality and there is no inspection of your property. You get a license and a number for your property, go to a print shop to get a plaque, and off you go.

RENTING WITHOUT A LICENSE

If you rent out your property via portals like Booking without a license, you could be fined up to 50.000 €. I’d advise anyone thinking of renting their property to tourists to get the license and not have to worry about an inspector calling. Even if you have to pay for a declaración responsable, the cost is minimal when you compare it to the returns over the first year.

Im specting how market are change, and I just answering questions of clients and owners. Nothing to do up to quarantine ends. I see many people unemployed, impossible to have normal work actually, Business are all down, Many restaurants and bars would be hazard to open again, As some owners declarate their bankrupt. Horizont are clowdy at this moment, Owners will need to sell, but to who? No new homes mortgages, busy notary with died people, hereditary matters, no moving services, transport or logistic are almost with little restrictions, nothing you can do up to quarantine are over. Just stay in touch watching how properties are decrease their prices for nothing, nobody can sell now with normal procediment with paperwork, too busy, busy and delayed.

I recommend to many owners to keep the prices up to the market open back again. Why change prices? when apply mortgages or try to sign “escritura” in the notary are a hándicap now. Who change prices now, must change again after lockdown. Even i know who are selling very cheap... Up to. 30% less of prior prices in the beginner of 2020.

Prices before lockdown (in residential areas or private in a tourist places

These are long term rentals (6 months / 1 year)

1 bed € 600/800

2 bed € 750/ 1000

3 bed 1000/1500 (pool)

Electricity for 3 months (€ 200/300)

Water (€ 30/60) a month

Assurance € 20 a pers

These are Buying prices before lockdown

1 bed € 100/160.000

2 bed € 180/300.000

3 bed € 260/ up up up.

Plus you need to calculate around 15% on top of your purchase price for all cost (registration, papers, lawyers, etc.)