Renting property in Barcelona


 

 

 

 

 

Ah, Barcelona. Lovely city. Famous for its gastronomy, football, fashion and its Architecture, specially buildings designed by Antoni Gaudi such as the Sagrada Familia, Casa Mila or Parc Güell. A very cosmopolitan city with inhabitants of all countries and cultures. Also a great place for foreign remote workers and professionals to live and work. A vibrant city with a very fast pace rental market, probably driven by foreign and national demand, and a shortage of properties to let. This has caused some sort of  a rental bubble in the city and privileged surrounding areas such as the seaside (Gava-mar, castelledefels, Sitges) or more towards the mountains such as Sant Cugat and Valldoreix. It is estimated that rental properties are at their highest peak. Huge demand has caused an increase on rent of 20% to 30% in the last 12 to 24 months. An average 3 bedroom property in the city of Barcelona is let for around 1,400-1,500 Euro. This is very good news for those who own or want to buy property in Barcelona with the aim of letting them on a long-term basis.

It is clearly a Landlord´s market and tenants very often see properties disappear from the rental market in 48 hours. This puts landlords in an even stronger position and allows them to ask for rents that would be unthinkable 2-3 years ago. Excellent news for landlords and not so good for prospective tenants as they are now facing higher rents but we should always look at the bright side. This is a sign that Barcelona, in spite of the last political events and the absence of a local Government, is thriving when it comes to the property market and rentals are their highest performer at the moment. And if a city thrives, then their inhabitants, businesses and commerce should benefit as well.

The above only refers to long-term rentals. If we bear in mind that there is another market for holiday rentals, Airbnb and et al, then we can clearly see that Barcelona has a lot to offer to those foreign investors wanting to either get a property in a vibrant and sunny city like Barcelona or invest in a property that can be let with a good return.

Some caution needs to be placed on holiday rentals as not all properties count with a touristic licence. The current Mayor is targeting holiday rentals with no touristic licence and the penalties and fines applied can be very high. In light of this, any person wanting to buy a property in Barcelona and exploit it as a touristic apartament should make sure that the property counts with the necessary licences. Alternatively, a long term rental would be a good solution as it still brings a good return in the current rental market.

And for those wanting to rent a property, just two lines of advice:

  1. Reserve the property if you saw it and you like it (otherwise it may disappear from the market a few hours later)
  2. and get some independent legal advice if unsure as to the terms of the tenancy agreement.

I am writing this post from Barcelona, at 6:30 pm. The sun is still shinning and the Barcelonians are getting ready for the weekend. It is probably time to log off and have a glass of cava or an estrella beer outside!

 

What is the plusvalía tax? And why should it be charged after the death of a person?

This is a question very frequently asked by our clients. The question usually comes with a frown on the face. Clients understand the concept of Inheritance tax: someone dies, and the Tax office applies a tax because the beneficiary gets “presumably” wealthier. So far, so good but what is the plusvalía tax then? Clearly, the beneficiary has already paid a tax on death so why should he/she pay another tax when a person dies?

That´s a very good question and the answer is simple. There is another tax because this allows local councils to get more revenue. Now that we have faced the honest truth, we need to focus on understanding what this tax is and whether it could be avoided.

In order to understand this tax we need first to bear in mind that each property has a rateable value affixed by the local councils (valor catastral). This value is the base on which a multiplying coeficient will be applied to ascertain the minimum tax value of a property.

Ok, wait a minute. We are now talking about too many values. What is the rateable value and what is the minimum tax value? The former is the value recorded in the local council´s registry. It does not have anything to do with market values. The second one is the minimum value that the Tax office will accept in a property transaction. Buy or inherit a property for less than that tax value and you will most certainly have the Spanish Tax man knocking on your door asking for further tax on your property transaction.

Now that we have a slightly good idea on the two types of values, we can explain that the plusvalía tax is a tax levied by the local council every time that a property is transferred, whether this is by death or a sale. In this case we are talking about a death and therefore the plusvalía tax will have to be paid by the beneficiary of the property or the estate. Regardless on whether the property is worth more or less than when the deceased acquired it, the local council will look at the rateable value on the date in which the deceased died and will also bear in mind the date in which the property was initially acquired by the deceased. Using some values and applying some multiplying coeficients the town Hall will the charge a tax, which is the plusvalía tax. The longer the deceased owned the property, the higher the tax (up to a maximum of 20 years, where the tax coeficients reach a ceiling and do not go any higher). This tax should be paid within 6 months of the death of a person and if it is not paid within that period of time, then penalties and interest will apply.

Can the plusvalía tax be avoided? Well, there is some discrepancy here. The general approach is that the plusvalía tax should always be paid and then, in those cases where the market value of the property has gone down then a refund can be requested but this will only happen in sale and purchase transactions, specially for properties that were acquired in the peak of the Spanish property market and have been sold recently for a loss. When it comes to the inheritance of a person, there is little that can be done to avoid it and the sooner is paid the better.

Your lawyer or the Notary Public preparing the deeds should be able to give you a pre-calculation of the potential plusvalía tax when he sends you his quote and estimate of costs. And once received, there is no other option than to pay it and as they say in the UK “bite the bullet”!