Is it Still Worth Investing in Real Estate Rental in Spain?

The appeal of Spain as a tourist destination continues to grow, and platforms like Airbnb have only amplified this phenomenon. Recently, residents of Mallorca have protested against the negative effects of mass tourism, with rising real estate prices being a major concern. This raises the question: is it still attractive to invest in Spanish real estate for rental purposes?

The Impact of Mass Tourism

Last year, Mallorca, Menorca, and Ibiza welcomed a record 17.8 million visitors, while the Balearic Islands have fewer than 1.25 million residents. The massive influx of tourists has led to a significant increase in real estate prices, which is a major concern for the local population. Many tourists purchase second homes in these regions, driving up demand and consequently prices.

A Complex Situation

However, the situation is not entirely black and white. Filip Berger, Business Development Manager at Nieuwbouw in Spain, points out that Spain is heavily dependent on tourism. "Each region fights for the income from vacationers and second home owners," he says. "Where there is a lot of vacation rental, a vibrant local economy with cafes and restaurants often emerges."

How to Invest for Optimal Returns?

According to Freyke Van Looveren, co-founder of Nieuwbouw in Spain, it is crucial to choose a good location to achieve an attractive return. "It all starts with a smart purchase," she explains. She also emphasizes the importance of local regulations, as each region has its own policies and investors need to tailor their strategies accordingly.

Carl Vorsselmans, also co-founder of Nieuwbouw in Spain, adds that it is often necessary to give cautious advice. "Investing in real estate in Spain remains an entrepreneurial endeavor, with reliance on political policy decisions. Professional guidance from people who understand local sensitivities is therefore essential."

Tax Considerations

Another aspect to consider is the tax on rental income. In Spain, a tax rate of 19% applies to rental income, whereas in Belgium, these earnings are currently tax-free.

Conclusion

Although the pressure on the real estate market in tourist regions such as the Balearic Islands is increasing, there are still opportunities for investors who proceed with caution. It is important to understand local legislation, invest strategically, and seek professional advice to navigate the complexities of the Spanish real estate market. With the right approach, attractive returns can still be achieved despite the challenges posed by mass tourism.

Source: Business AM