Since the legalisation of holiday rentals on the Balearics, one’s own holiday home is also an interesting capital investment.
Since the last financial crisis, real estate has been one of the most popular capital investments and meanwhile, a 4% return on rentals is considered to be an interesting investment. The German real estate market has responded accordingly, and recent years have seen prices for residential real estate booming, particularly in attractive city locations. Surfing the real estate portals one almost has the impression that Germany has been “bought up completely”.
A holiday home as an investment: Majorca is increasingly becoming the focus of European investors looking for real estate that offers high returns and retains its value.
The situation in Majorca is entirely different. Porta Mallorquina alone – one of the biggest providers on the island with eight branches – is currently offering around 2,000 properties for sale on its website http://www.porta-mallorquina.com on this popular Mediterranean island. Joachim Semrau, the founder and CEO of Porta Mallorquina knows why:
“For years the newspapers have been writing that property is being sold off at rock bottom prices because of the real estate crisis. But the bubble mainly affected overpriced residential property in the major metropolises of Madrid, Barcelona and Valencia. Majorca enjoys worldwide popularity as a holiday home location: because it’s an island and because of building restrictions, good locations are limited – and values are correspondingly stable.”
Porta Mallorquina has noted price reductions in fewer than 5% of properties over the last 3 years. According to Joachim Semrau, this is however also down to the highly realistic market valuations given by his Real Estate Consultants on the ground.
“Concrete gold” with sea view
The wide range of choices and stable prices have recently been attracting a growing number of investors to the island – not only with the intention of securing their capital, but also to earn attractive returns from lucrative holiday rentals. Because for around one year now, the owners of fincas, detached houses and terrace houses in the Balearics have been able to apply for a holiday rental licence and may officially let their property to holidaymakers immediately after making the application.
“If you use a property that costs around 400,000 euros for holiday rentals, you will earn an average return of 4-5% per annum after just 20 weeks of letting. In addition, you can also use the property for your own holiday,”
says Joachim Semrau, doing the sums. High-end properties costing upwards of € 1 million, which can be let for over € 350 per night in the high season, can also achieve higher returns.
With a well-kept finca in a good location, such as this one in San Lorenzo in the northeast of the island, holiday rentals can generate gross annual returns of 5–7%.
This is also an interesting investment option for German investors, but many are hesitant about buying property abroad as they cannot control and monitor the process themselves locally.
Real estate provider with holiday rentals
This is why Joachim Semrau set up “Porta Holiday” at the end of 2013 and is now the first island-wide real estate provider with a one-stop shop offering sales, long-term lets and holiday rentals. If required, the Porta Holiday “hosts” will deal with all of the owner’s needs, right the way through to house management.
Finca Sa Caseta Ref. 020901
Inland holiday homes such as this finca for 8 people in Sa Pobla are particularly popular with cyclists and trekking holidaymakers (Ref.No. 020901, www.portaholiday.de)
Sigrun Gründler, an experienced holiday home manager, is a Porta Holiday Host in the North of Majorca. She is the contact person for both holidaymaker and owner, from key handover to the guest through to garden and pool maintenance.
“This means I can ensure that the guests enjoy their holiday, and the owner has the security that somebody is always keeping an eye on his property and looking after it.”
The expert advises that when choosing a property, those planning to buy a holiday home in Majorca with the intention of generating income from holiday rentals, should first ask themselves the question of whether they wish to use the property for their own holidays.
“The better the quality of the fit-out, the higher the quality of the holidaymaker.”
In selecting its properties, Porta Holiday sets great store by quality, and concentrates on the upper price bracket. At the moment most of the properties available on portaholiday.de are still in the North and Northeast, but from March the portfolio of holiday homes will also take in the Southwest of the island.
Tax considerations
Earnings from holiday rentals are therefore also of interest to German buyers. But what is left over after tax? According to Elena Germán from the tax and legal firm, ETL Mallorca, in Palma de Mallorca, earnings from the rental of properties in Spain are always subject to Spanish tax, irrespective of whether the owner is a tax resident in Spain or elsewhere. The tax payable is calculated on the entire rental revenue.
There is one positive side effect for EU residents outside Spain: the costs associated with the holiday property (e.g. insurance premiums, maintenance and repair costs, amortisation, taxes, condominium costs, etc.) can be offset against profit. The current rate of tax is 24.75%, and the local German tax office merely retains the right to take any such income into account when determining the individual’s tax bracket. In this regard too, therefore, there are lucrative prospects for German investors.