Rental prices fell in 77pc of Spain’s primary rental markets (cities), according to a study by Spanish property portal Idealista.com and the Public Rental Company(SPA).

Rents fell the most in Toledo (-8.7pc) and Oviedo (-6.8pc) but rose in Lleida (+11.2pc), Bilbao (+4.2pc), and Alicante (+4.1pc).

In Spain’s biggest cities, rental prices fell 1.3pc in Madrid, 3.1pc in Barcelona and 4pc in Valencia.

The latest annual rental decline follows a bigger decline in 2010, so the cost of both buying and renting a homes in Spain has been getting cheaper for several years.

The study was based on 38,000 properties listed for rent in the 12 months to the end of December.

The majority of holiday lettings in The Canaries are illegal and the regional government is cracking down with swingeing fines

News has reached me from The Canaries (thanks to a helpful reader) that the regional government is cracking down hard on all unlicensed holiday lettings, which basically means most owners who rent out their homes to tourists from time to time. You can get more details from this article in Canarian Weekly.

The question of tourist rentals is a minefield of confusion and contradictions, as I pointed out in an article about rental licences and holiday lettings in Spain for The Sunday Times back in 2007.

In some areas you need a licence, in others you don’t. In those areas where you do need a licence, the law can be vague, contradictory, inconsistently implemented and arbitrarily enforced. On top of that promising start, most owners are blissfully unaware that such laws exist.

A powerful hotel lobby that sees holiday rentals as a threat is usually behind these laws, but given the glut of homes for sale, the state should be bending over backwards at all levels to encourage people to buy, which implies making tourist rentals as easy as possible.

But no. Instead they are issuing stunned owners with fines of up to €30,000 for renting out their holiday homes to tourists. If you engage in holiday lettings, you might want to bone up the relevant laws in your area.

I should add that so far I have only heard of problems in Mallorca, The Canaries, and parts of Barcelona, but that doesn’t mean there won’t be problems elsewhere.

Almost 90pc of landlords who rent out their Spanish properties on short-term holiday lets earned around 45,000 Euros or more, according to a recent article at Fotocasa.ee, a leading Spanish property portal.

“With more than 1 million empty homes in Spain, many having enormous difficulties selling property, and a growing number of repossessions, holiday lettings are a magnificent way to earn income and avoid defaults,” Grupo HomeAway are quoted as saying.

Homeaway.es users are reported to be between 41 and 65 years old, many of whom are inexperienced internet users.

That’s what you will read in the Spanish press. Personally, I would be highly surprised if 10pc of holiday-rentals generated 45,000 Euros per year gross.

Begur, on the Costa Brava, where many property owners will be affected

Making a bit on the side with holiday rentals won’t be so easy in future for property owners in Catalonia. Following in the footsteps of The Balearics, the government of Catalonia has passed a decree making tourist rental licences obligatory for landlords.

The decree creates a new classification of housing called ‘vivienda de uso turístico’ or ‘tourist use housing’, which will apply to any residential property rented out for 3 months or less. From now on a licence, obtained from the local town hall, is required.

So rentals in Catalonia, holiday or otherwise, of 3 months or less, will be illegal in future without a licence. The cost of the licence and other conditions will be left up to local town halls to decide.

The regional government of Catalonia, or Generalitat, says the new regulations will raise standards for holiday rental clients whilst protecting landlords by making it easier to kick out troublesome clients.

More tax

What the Generalitat kept quiet is that the new licence will raise revenue and help the tax authorities clamp down on holiday rental income tax evasion. Many landlords, especially foreigners, charge cash and don’t declare rental incomes to the Spanish tax-man, which won’t be so easy in future.

Some half a million homes are rented out to tourists, according to estimates by the Generalitat. Landlords who rent without a licence in future will risk fines of between 30,000 and 90,000 Euros.

Related
+ Tourist property rental licences in Barcelona and Catalonia (2008)

Average rental prices rose 1.1pc in October, according to data from the INE. That was half the level of consumer price inflation, which was 2.3pc in October. As a result the real price of renting a home in Spain fell by an annualised 1.2pc in October.

Rental prices rose the most in the Balearics (+1.6pc), followed by Cantabria (+1.4pc) Galicia (+1.4pc) and Andalucia (1.2pc). Prices rose the least in Murcia (+0.6pc), La Rioja (+0.5pc), Extremadura (+0.1pc) and Navarre (-0.3pc).

More than half of all Spanish landlords charge rent in under-the-table cash payments, finds a new study of Black Economy rental contracts by Gestha, a division of the Ministry of Finance.

If true, more than 1 million landlords (55.4pc of the total) fail to declare their rental income, reveals the study, carried out by specialist from the Spanish Treasury.

Almost anyone with any experience of renting property in Spain could have told them that cash payments are rife, if not the norm.

Gestha’s findings were based on cross-referencing data from both the Spanish Tax Authority and the Ministry of Housing, but the Tax Authority, known as La Agencia Tributaria, has questioned the findings, saying they are impossible to ratify.

They argue that data used by Gestha – an estimate of the number of rental properties from the Ministry of Housing and tax returns from the Agencia Tributaria – are distorted by various factors and cannot be cross-referenced without being misleading.

Gestha also find that attempts to prevent tax fraud amongst landlords have been a big failure, with rental fraud rising by 473 million, or around 20pc, to almost 3 billion Euros.

The Ministry of Housing has sent a letter to 8,000 recipients of housing benefits for the young (RBE) ordering them to return the money received after the Spanish Treasury discovered they earned more than 22,000 Euros a year.

Under the RBE, young adults in Spain are entitled to 210 Euros a month in rental support if they earn less than 22,000 Euros a year.

Those affected have been sent a letter and SMS by the Ministry of Housing warming them that the regional authority will be in touch to clarify their circumstances.

In the meantime, the housing ministry has taken the precaution of suspending all monthly payment to young adults suspected of earning more than 22,000 Euros per annum.

No doubt some young adults will see their housing benefits cut off even though they are entitled to them.

Average rental prices rose by 1% in July compared to last year, show the latest figures from the National Institute of Statistics (INE). This is surprising given the glut of property for sale and rent on the market.

Over 6 months annualised rental prices have gone up by between 0.9% and 1.2% per month, whilst house prices have gone down between 4% and 5%, meaning that rental yields are improving. Some good news at least for beleaguered property investors.

But consumer price inflation has risen by 1.9% in the same period, so although yields are rising, rental income in real terms is actually falling.

Rents went up the most in the Balearics (+1.5%), and down the most in Navarre (- 0.5%).

Rents are falling even as demand for rented accommodation surges, suggesting that the supply of new rental properties is outstripping demand.

By region, rental prices fell the most in Zaragoza, down 30%, and Castellon, home to the Costa Azahar, where rents are down 21%, say Idealista.

In Barcelona, rents are down 12% compared to June last year.