As elsewhere, Mediterranean Spain has experienced a drop in property sales leading to a property investor’s dream ticket; increased choice and low price. The dip, which many see as temporary, has had an unexpected windfall for holiday home owners: It has fuelled a 157 per-cent jump in holiday home lettings.
In 2009 job and financial insecurity saw increased numbers of northern Europeans, North and South Americans, opting for staycations; holidaying in their home country. Demand for holiday home rentals in Spain also increased as thought was given to reducing vacation costs whilst increasing the holiday experience.
The trend towards holiday home rentals has brought relief to those who bought homes along the bustling Mediterranean coast. Traditionally, when not being used for vacations, many properties remained empty. It was still a sound investment at a time when values were soaring. As the credit crunch began to bite deeper owners retreated and were soon opening their holiday homes up to the booming rental market. This was seen as the ideal solution to help make ends meet and cover outgoings. It is estimated that twelve weeks holiday home rental will cover its financial obligations; the rest being profit.
Rentals Cheaper than Package Holidays
The year 2007 was the first year in which holiday home rentals outsold package holidays; a trend that is continuing. Since then budget conscious holidaymakers have been doing their arithmetic. Those whose access to credit had dried up so were unable to buy, or inclined to book into a hotel, realised they could save money by renting rather than buying. Additional spin-offs include a greater choice of location and more independence.
By sharing the costs with family or friends there are even greater savings to be made. According to one holiday home website, which has seen a 30 per-cent surge in orders compared to last year, the rise in bookings is due in part to rentals being up to four times cheaper per square foot than hotel-based holidays.
One pundit speaks for many when he says; “It is the perfect marriage of convenience for hard-pressed holiday home owners and holidaymakers working to a tight budget. The spin-off is that it is helping property sales. Up until recently buy to rent has not been a significant part of the market. It is now.” One in ten homeowners offering their homes up for rent say the economics add up; the main goal being to cover outgoings.
Spanish Costas Offer the Most Potential
Statistically, Prague offers the best value for money. Will Spain’s property market close the gap? For many it is a no-brainer. The Spanish government is modifying housing regulations, which until recently weighed heavily in favour of tenants. It could take up to a year to evict a squatting tenant. This has been legislated down to one month’s notice; one month’s court order to vacate the premises. This is complemented by it becoming easier to pursue occasional rogue tenants for unpaid rent.
The increase in security will release tens of thousands of villas and apartments up to the rental market; the increased competition will lower rents to a sustainable level to benefit both homeowners and renters. The trend will also give added security to house buyers.
During the first quarter of 2009 the Spanish Costas, Cote d’Azur, and the Canaries were represented in the Top 10 travellers’ choice of destinations. Of the top fifty most sought out locations at the beginning of 2010 Spain ticked the top three boxes: These were Malaga (Costa del Sol); Tenerife in the Canary Islands; and Alicante, the Costa Blanca’s main hub airport.
Taking family holidays still accounts for most rental holidays (53%). Closing the gap are reunions at 38%: Fiesta and festival events draws 25%. There is also growing interest coming from the business sector, which is looking to cutting costs by opting for cheaper alternatives to hotels. A rented holiday home villa accommodates up to ten members of personnel; with housemaid in situ, hotel costs are slashed by up to 70 percent.
© Michael Walsh: Semi-retired Spanish real estate advisor; legal and property journalist. email@example.com