Reply To: Anyone looking for a bargain in this market?

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Anonymous
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@ashtondav wrote:

Let’s get down to basics and reality.

Based on the past 4 years of renting my 2 bedroom place I know i can achieve an annual rental income of £6,000. (To be fair this has fluctuated between £5,500 and £7,000.)

I pay expenses of £1,800.

I get a net income of £4,200.

I pay Spanish tax of £1,500 (25% of gross income with no allowances as a non resident)

Income after tax: £2,700. In other words a fully furnished 2 bed property would have to cost about £40,000 to £50,000 (6% post tax return?) to make sense if one complied with Spanish tax law, AND the property was bought only as a commercial proposition and had no value for personal holiday use.

Even if you decided to be illegal and only pay UK tax, and deduct allowances before tax at 20%, your income after tax would only be £3,360. Even this implies a maximum price for a 2 bed unit of £50,000 to £60,000.

Now these financials (if you play legal) mean there will be a disaster in the Spanish property market, unless the government gives favourable tax treatment to non resident landlords.

This is completely different to the UK where, at a certain price point, BTL investors start buying because they can make a decent return on the property, due to being able to off-set mortgage interest and annual costs against rental income.

Totally agree, there is no investment potential in Spanish property in the main (obviously exceptions exist), especially as base rates/lack of liquidity (causing interest rates to increase) at the mo. and falling share prices (causing divi. yields to increase) make alternative investments more attractive and the cost of capital higher. The tax probs with Spanish property to add fuel to the problems.

Its simple a question of wishing to own abroad (holidays etc)/buy for retirement etc. Its a ‘rich persons’ folly in some respects.