Is It Better To Buy or Rent Property in Spain ??

To Jon's question, standard rental contracts are for a minimum of 12 months, but then roll on to five years in total, during which time by law the rent can only increase by the rate of inflation. The contract can be terminated after the first year by giving notice.

This is another reason why it could be beneficial to rent at present - you are fixing your rent during a low period, if the market were to recover in a couple of years' time, your rent could not be jacked up beyond the modest inflation related increases.

The consensus forecast on residential property values suggest they have 20% or so further to drop - but bear in mind that is only an average across the entire housing stock, it does not mean that a specific property will drop by that much. And, of course, economic forecasts are not always accurate, as you may have noticed by now...

Whilst I have a foot in both camps, owning a property (in the UK) and renting one (in Spain), so certainly do not knock either practice, I would say that the old cliche "renting is throwing money away" really does not make sense. One could equally say that paying mortgage interest is throwing money away. Yes, owning a property gives you the opportunity to benefit in any increase in its value, but you also stand to lose if the value goes down - and, if that were to place you in negative equity, that loss can be disastrous. Ownership gives you more control over what you can do with the property; rental gives you control over when you move on - I've twice sold homes which took over a year to shift, in part due to purchasers falling through. If that would be awkward for you, if circumstances required you to move away, you might be better off renting.

I assume leases would not automatically roll on for 5 years & that this is something which would need to be mutually negotiated at the outset ?

Keen to hear any more "pointers" or experiences re long term leases.

Thanks,

Jon

The agent explained to me that that is how rental contracts work here, and certainly all my colleagues with whom I discussed this have the same arrangement. I also got one of the company's lawyers to check over the contract, he told me it was a standard rental contract.

To be clear, after the first year the tenant can break at one month's notice, but the landlord cannot throw you out, nor increase the rent by more than inflation, until you have been there for five years (unless, of course, you misbehave, but only then with a court order). then there is an option to renew for a further two years, then at seven years you must commence a new contract.

One thing I do not know, however, is whether this is national or regional law (I'm in Madrid).

Buy for your little peace of Spanish heaven.

Rent if you are unsure of what area you would like or unsure if Spain is for you.

But, in a rental property you will, imho, never feel as comfortable as it is someone elses house not yours and you are not free to do what you want with it when you want (and the Landlord may decide he wants it back just when you are getting comfortable).  And obviously rent is always lost money whereas a mortgage is always chipping away at the lump sum until it is wholly yours .  It may be more than the rental equivalent at the moment but in the long term you will definately be in a far better position (rent free infact and with a Capital Asset).

But buy for the Lifestyle, not for profit!

And Sanchez 50% drop ... rofl ... you are still hoping for that 10k Beachside apartment  .. sorry it ain't going to happen.  You can already pick up some real bargains.  And if you got your 50%  drop then that would be awesome and i would have to buy more!!!!!!

Hi Piltonian,

The concise data you have outlined is very relevant & also clearly advantageous from a tenant's perspective - many thanks.

Does anyone know if these tenancy arrangements also apply on Costa del Sol ??? Perhaps, Campana may be across this.

TPI has made some interesting points although its difficult discounting the fact that the buy/sell costs equate to > 4 years rental !!!

Jon

I'm in the same camp of those who find buying a better option. I rent out my two properties short term April to September and for longer periods in the winter. As the mid/high season cover most of my outgoings, I can afford to offer very attractive rates in the winter.

Like many owners, I love the feeling of being in  my own house, as opposed to someone else's. I can enjoy everything that the a rea (South of Costa Blanca) offers and when the weather limits what I can  do outdoors, being the perpetual optimist that I am, i view that as an opportunity to do jobs around the house.

Piltonian
 

The rental contract you talk about applies to Madrid , there are other contracts for Costa Blanca and Costa Del Sol

I use a long term contract but it stipulates that it is for Tempory Housing only and not for Permanent residence and is for a period of 11 months which is renewable with the consent of both parties, I also have a contract for up to 5 years

I myself rent and my contract was for a defined preiod of 3 years but I have renewed it again.

Re your contract for 11 months, subject to what terms & conditions is it renewable ?

Thanks,

Jon

PS: A little unclear re your reference to 3 & 5 year contracts !

This message was last edited by Jon07 on 24/07/2011.

If you are not sure with the place where you will permanently live then I think rent property is better than buy a property in spain.   

Hi  I am toying with moving to spain,

I've been told that now you can only rent a property for 11 months.If so what happens after the 11 month?

Does that mean you can no longer rent long term? ie 1-5 years?
Cheers steve

There is no golden rule as far as renting vs. buying goes.

A lot of emotion goes into buying. They are your walls built on your soil and you have the right to do what you wish, limited of course by planning laws. And that emotion has a surcharge. For some people it may be worth it. To others it isn't.

I have done both. Ihave both rented and bought and I wouldn't say one was markedly better than the other. What matters is what percentage of your income you are spending on your house and whether that is a sustainable and healthy figure. I wouldn't want to be mortgaged to the hilt and to have to forgo all pleasures in life just to live the illusion of owning my own bricks and mortar. But if it was something I could afford without exposing myself to any undue risks, obligations or penalties, it's something i would do. But different people may draw the line in different places.

But just some thoughts here. If you want to know where the profits are going, follow the scent of the money.  If being a landlord was genuinely such a profitable proposition, the banks wouldn't be selling you mortgages but would be buying the properties themselves and renting them to you. In fact most landlords are not banks or big corporations but individuals who are probably accounting for their own time, effort and risk too cheaply. In fact, ask any bank if you should buy or rent and they'll say buy. So selling mortgages to poor individuals is obviously more profitable then lending money to rich landlords (on an aggregated basis). Remember the bank places its own interests before yours, and their advice to you reflects that. On the other hand, if being a landlord was a dead money loser, there wouldn't be landlords any more. So all in all and empirically speaking, the situation is balanced. So it's juts a question of personal choice and preferences.

Stevio

You can rent for long periods. However, up to 11 months doesn't give you "occupational" rights. That means the landlord can give you notice to move. Once you've been in longer than that, it is very difficult to move you as you can claim it is your home.

There have been many cases where people have claimed "occupational" rights and simply stopped paying the rent. The landlord then has a very time consuming and lengthy process to declare his right to the property. The Spanish courts work extremely slowly and it can take years to go through it all hence the reason many will only enter into an 11 month contract. Saying that, we have one house where the people renting are on their third 11 month contract. 

Getting back to the original post !!

We own a property and live full time in Spain and we often discuss this point of "buying or renting"

These are the points we discuss most of the time.

In hindsight we think we may have kept our property in the UK and rented in spain (forgetting the 165 day rule for now).

Why ? well as someone has pointed out, we could easily move to another area of Spain or another country.

If our Urbanisation deteriates, again we could easily move, (if renting)

If we rented we would not constantly be worrying about "death duties" in Spain, despite European courts finding Spain guilty of breaching EU law ! and telling Spain to bring their laws in line with Europe - which they constantly refuse to do !

When we die our Three kids inherit, we still haven't had the answer from them to "do you want to inherit a property in Spain"  and all that goes with it ?

The thing we can't get our head around (being Brit's) is the thought of not owning a property anywhere, it's a culture thing with Brit's that we have to own a property. Other European countries do not seem to have that mindset.

On balance, having given it some thought - right now with property being so cheap, we would still opt to buy.

Having said that, if the property market eventually picks up (and it is doing here on the Costa del Sol, albeit Bank repo's) I think we may sell and try another country, just for the adventure.

Just to reiterate one point. It is the thought of our kids having to pay death duties, even though the money is in the bank. Our death duties have been estimated by our accountant at 16,000 euros - that is money our kids could have if we sold-up and rented.

Interesting topic, and interesting to read other peoples point of view on this. 

Our death duties have been estimated by our accountant at 16,000 euros - that is money our kids could have if we sold-up and rented.

Swings and roundabouts! You (hopefully) will pay a lot more than 16,000 rent in the meantime, dead money - pardon the pun

Old posts are interesting aren't they. In this case nothing has changed. A decade ago I would have said BUY. After all that has happened I wouldn't buy right now. Keep the UK house, rental income is good and use the money to rent in Spain. You would probably have money left over for luxuries too. An additional bonus is that your UK house would be a rising asset. Take a look on Zoopla to see how much your house has risen since you sold and moved to Spain.

if you buy now in Spain and count in the 10/12% buying costs you will be in negative equity for years. Also there is no reasonable get out strategy for Spanish property. Despite some claims that the market has picked up (the same as they were claiming last year) it is taking years to sell. Some I know have been trying to sell for years despite slicing a chunk off the asking price. 

I seem to have put this post in the wrong place....sorry!

rent first if you like it then buy

Thanks mariedav,

What happens at month 11 do you have to move out?

What I'm thinking is do I move to spain sooner or later. I'm 59 my wife 61. She will only get OAP in 2 years time.For me it will be age 66. I might get a small pension from a previous employer or two.

So I can wait 7 years and move then and still have a house in the UK. (or sell and buy in Spain).

Or Sell up, house worth around 200,000. Live off the proceeds and hopefully get some part time jobs untill the pensions kick in.

Ta
 

You may like these tips on renting:

http://www.costaluzlawyers.es/wp-content/uploads/2013/07/rentals_free_guide.pdf