Is renting your house as a holiday let still a viable option? Part six – my thoughts on the future of the holiday let market

Is renting your house as a holiday let still a viable option? 

 Part 6 – 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!                                                
                                                   Beverley

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