According to statistics just released by AENA, the Spanish airports authority, Spanish airport arrivals in August were the highest ever recorded for the month, up 4.7% on the year with a total of just over 24 million passengers. Overseas visitors accounted for 17.3 million, the balance being internal domestic travellers. Madrid Barajas saw a very strong rebound, up 14% compared with 2014, perhaps only to be expected as it had been particularly badly hit during the recession, losing millions of passengers, while the Mediterranean airports saw increases around 5%.
Why is this good news for owners who rent out their properties? Government tourism figures released last month showed that Spain is on course for another record year, underlined still further by these August figures. For the last two years Spain has been the third most visited country in the world, breaking through the 60 million barrier in 2013, increasing to 64.9m in 2014 and on schedule for 66m+ in 2015. The same set of statistics also gave the breakdown of where all these millions of visitors stay: 63.5% in hotels, 36.5% somewhere else. Clearly some of that number will own their own property or stay with family or friends but that still leaves a serious number looking for non-hotel accommodation, perhaps as many as 20 million+.
Across the board, owners of property in prime locations all along Spain’s Mediterranean coastline were able to put up the ‘No vacancy’ signs this summer and with all high season weeks taken they can expect a gross yield of something in the region of 4%±, roughly the same rate as a good city centre apartment will bring in or a long term year-round rental. The key to achieving an even higher yield is to focus on a mix of short term holiday lets and some longer lets at other times of the year in the few areas with a genuine 12-month season, and in the case of Spain that means heading for the mildest climate and golf. And I don’t mean areas with one or two golf courses within 30 minutes, I mean the area that attracts the serious golfer between October and June, that is the Costa del Sol, which also markets itself as the Costa del Golf, and specifically, the prime stretch between Marbella and San Pedro. An 8% gross yield is achievable in this area, with about 4% coming in the high season weeks and the other 4% spread through the mid and low season weeks. Outside this zone, 4%± is realistic in summer but mid and low season rentals probably won’t put on more than another 2%, if that.
Another strategy is to target longer term rentals in mid and low season months; many northern Europeans and Americans rent a property for 3 – 6 months in winter. Another popular option, particularly among Scandinavians tenants, is to rent year-round but agree to vacate in the high season. In this way the tenant doesn’t have to pay for months they don’t use and the owner gets the benefit of high season income. The only downside is that some storage space must be available to secure the tenants’ personal belongings. This type of tenant is ideal; well-off, retired, reliable.
With demand outstripping the supply of quality rental properties in prime locations yields should hold up even though property prices are rising as rental prices are also definitely on the increase. A good property should already be taking bookings for 2016 and see regular repeat business. I found a Marbella Old Town house for clients and in its first full year of lettings it will achieve about 280 nights booked. An American couple took it for 3 months from January and there have been only a few empty slots since then. Clients bought a San Pedro beachside apartment in May 2015 and starting letting on June 1st. Almost every night since has been booked and income in just the first six months takes them slightly above a 4% gross yield so as other weeks get booked during the winter and spring they should have no difficulty in achieving 8%±. You can see both these properties here with links to the owners’ websites. Owners should always consider discounting last minute bookings and it goes without saying that free wifi, flat screen t.v. & satellite, high quality interiors and equipment are considered standard requirements by tenants.
When I am working for a client whose brief requires reliable rental income I target certain areas and ignore others, I look for a type of property and reject others. Get the location wrong, even by just a few kms and income may be halved. As well as as pinpointing the right location in a particular area you need to be in the right region because some have legislated against short term holiday lettings, pressured by the powerful hotel lobby and disgruntled locals. This is particularly true in Barcelona where some localities are overrun with holiday lettings while in Andalucía legislation is pending but looks likely to introduce a licensing system.