What is the exact position about apartments in 2018

[Hanser]

It's effectively a regressive tax because it makes short-letting of lower value properties less attractive. Accidentally or otherwise, it could cause the price of these properties to be driven down and become more affordable for residential use. This could also 'stretch out' the overall property price range.

 

[Tomir]

I've been giving this new rental law some consideration and realised that the whole thing is massively flawed. I'm amazed no one appears to have brought this up before, least of all people who were defending renting. It is a completely unfair tax for one fundamental reason, it takes absolutely no account of the value of the property and therefore what is achievable in terms of income. I'll explain more:

If you own a 3 bed villa/house/apartment that has proven to be eligible for a licence then you will be taxed at 3500euros per room, so 10,500euros.

As we know some of the properties around PP (for example) can sell for millions, so to compare two properties on one holiday rental web site for a week in Sept, a three bed villa is the same price as a 1 bed apartment.

Therefore one person would have paid 3500 euros and the other 10500 and their incomes will be the same. That is until you take into account the fact that 3 bed villa has a pool and the upkeep of that, plus the cleaning of the much larger space to boot! Completely unfair!

And that is before I could compare a 4 bed multi million pound property with a 4 bed villa tucked in a not perfect position. Then, for the same week in Sept 19, the rental costs are 3500e and 850e. Although rates obviously change through the months, taking that as an average for 4 months one income is 42000 and the other one 10,200. How can that be fair? Its so unfair, its ridiculous!

I think you will find if I am correct that it is 3500 per bed space and not per room. Therefore a double room would be 7000 euros. I am basing this on information received from Jan Dexter. Am I correct?

 

[Papillon]

Property Prices

You are quite right Hanser, after 14 years as a property owner we put our apartment on the market this year, we sold at nearly 20% less than the original valuation but were happy as we bought at 1.45 exchange rate and have sold at 1.12.

Out of interest we bought at the time of black and white payments where the white over the table payment was recorded on the form 211 tax return. (30% less than actual purchase price)

Our selling price showed a 15% capital gain over the white payment but in fact was a 15% loss on the original purchase price.

This is why I believe you have to be careful when reading about increased property prices until the very dubious practice of defrauding the tax man has worked its way out of the system. (Aided and abetted by all solicitors by transferring the substantial capital gain of the seller to the buyer when the scheme was abandoned in about 2012).

Still love PP and will be returning in the future but definitely feel like the proverbial boat owner who was only happy on two occasions.

PS.
You are correct Tomir, all licences are based on per bed just like hotels.

 

[Rockape]

I think you will find if I am correct that it is 3500 per bed space and not per room. Therefore a double room would be 7000 euros. I am basing this on information received from Jan Dexter. Am I correct?

Yes, you are right.....well that simply doubles my argument. Incredible! Going for the quality over quantity on the island is the stated aim, but I hadn't considered this process would be so successful at achieving it.

 

[alcanadakid]

You are quite right Hanser, after 14 years as a property owner we put our apartment on the market this year, we sold at nearly 20% less than the original valuation but were happy as we bought at 1.45 exchange rate and have sold at 1.12.

Out of interest we bought at the time of black and white payments where the white over the table payment was recorded on the form 211 tax return. (30% less than actual purchase price)

Our selling price showed a 15% capital gain over the white payment but in fact was a 15% loss on the original purchase price.

This is why I believe you have to be careful when reading about increased property prices until the very dubious practice of defrauding the tax man has worked its way out of the system. (Aided and abetted by all solicitors by transferring the substantial capital gain of the seller to the buyer when the scheme was abandoned in about 2012).

Still love PP and will be returning in the future but definitely feel like the proverbial boat owner who was only happy on two occasions.

PS.
You are correct Tomir, all licences are based on per bed just like hotels.

Having paid 15% capital gain in Spain, what is the U.K. tax position? I given to understand it is 28% less whatever Spanish tax has been paid, but I may be wrong. Also how is the difference in exchange rate taxed in U.K.?

 

[Papillon]

A couple of points, remember if you have joint ownership of the property you are allowed £11700 each before you are liable for gains after you deduct Spanish gains tax paid.
Any gain then is added to individual annual income and if each below £46350 will be taxed at a rate of 18% and 28% above for residential property.

Apparently my friendly tax consultant tells me the revenue are only interested in the purchase price and the selling price at the daily exchange rate on day of purchase and sale. This will determine gain or loss less Spanish capital gain paid.

It will be interesting to see how Brexit affects this in the future.

No financial advice intended, just my personal understanding.

 

[alcanadakid]

A couple of points, remember if you have joint ownership of the property you are allowed £11700 each before you are liable for gains after you deduct Spanish gains tax paid.
Any gain then is added to individual annual income and if each below £46350 will be taxed at a rate of 18% and 28% above for residential property.

Apparently my friendly tax consultant tells me the revenue are only interested in the purchase price and the selling price at the daily exchange rate on day of purchase and sale. This will determine gain or loss less Spanish capital gain paid.

It will be interesting to see how Brexit affects this in the future.

No financial advice intended, just my personal understanding.

Thanks Papilon, that is my understanding too

 

[JPALCOVER]

.... it could cause the price of these properties to be driven down and become more affordable for residential use.......

That is exactly what the "locals" are calling for........... not only in in PP; also in Barcelona, Madrid, etc.

Now, of course, you could reply, as in the late XIXth century, a few thousand miles further East: "The natives are restless? Get the guns out!"

 

[Hanser]

That is exactly what the "locals" are calling for........... not only in in PP; also in Barcelona, Madrid, etc.

Now, of course, you could reply, as in the late XIXth century, a few thousand miles further East: "The natives are restless? Get the guns out!"

Do you write for the Majorca Daily Bulletin by any chance?

 

[JPALCOVER]

Do you write for the Majorca Daily Bulletin by any chance?

Actually, I write for the Punjabi Gazette.

 

[P&C@29]

Availability

Just looking on Facebook lots of availability, maybe it could be the prices that some are charging or people are going elsewhere due to the holiday tax.

 

[debz1]

Talking to our property agent the other day and he said bookings are down at least 20%, and that the idea of bringing in the licencing law so that locals could rent wasn't working either as properties are too expensive. Pretty poor goverment decision

 

[mike_dublin]

https://www.majorcadailybulletin.co...-has-more-accommodation-places-than-muro.html

Pollensa has leapt above Muro for the first time in terms of the number of registered tourist accommodation places. In so doing, Pollensa now has the second highest number of places in the northern part of Majorca.

The reason for this is the inclusion of registered apartment holiday rentals places. The figures had previously been confined to hotel and villa places. Pollensa has long had more legal rentals places than those in hotels, but it has ranked lower because there are far fewer hotels than in other resorts.

The Pollensa total is now 20,468. Of these, 7,575 are hotel places; the other 12,893 are holiday rentals. ...

Pollensa was right at the forefront of holiday rental accommodation. This is a tradition going back several decades. By and large, there was not the hotel development which occurred elsewhere. Puerto Pollensa was already an established resort with small hotels at the time when the Alcudia Bay resorts were created from the comparatively little which had existed previously.

...

see full article on the MDB website

 

[mike_dublin]

https://www.majorcadailybulletin.co...er-holiday-rental-properties-down-almost.html

At a recent conference in Ibiza, the president of the Fevitur national federation of holiday rentals associations stated that the number of rental properties in the Balearics fell by 27% between 2016 and 2018.

Tolo Gomila observed that legislative changes and lower profitability because of a fall in the number of tourists had led to a decrease in the number of holiday rentals.

The worst time for amending tourism legislation, he noted, was “ when we had 4.5 million additional tourists that weren’t ours”. That was a time when almost the “only safe tourism destination in the Mediterranean was ours.”

The conference coordinator, University of the Balearic Islands professor of commercial law Juan French, pleaded for there to be an end to the “demonising of a sector that is good for society”.

Gomila stressed that only 6.8% of properties in the Balearics were for holiday rental purpose, while some 16% - approximately 85,000 - were empty.

...

One of the biggest problems is that bureaucracy is hindering the registration process.
Some owners have reportedly been waiting for their paperwork since 2015.

see full article on the MDB website

 

[mike_dublin]

https://www.majorcadailybulletin.com/news/local/2020/02/17/62799/balearic-holiday-rental-slump.html

The new regulations for the tourist rental market in the Balearic Islands have cost the sector about 500,000 customers in the last two years, according to the latest data from the Institute Balear d’Estadística, or Ibestat.

In 2017 almost 2.5 million visitors stayed in tourist accommodation but bookings plummeted by 25% last year to just over 2 million.

...

4,268 of the 14,297 rooms rented to tourists since August of last year were in single-family homes and 9,195 were in flats.

There are now around 2,300 apartments with tourist rental authorisation in Majorca, but none of them are in Palma, because the City Council has banned tourist rentals throughout the city.

The clamp down on illegal holiday rentals hasn’t stopped tourists coming to the Balearic Islands, they’re just opting to book hotel rooms instead of apartments.

see fill article on the MDB website

 

[bobley]

At least it keeps the hotel owners happy.

My mates are all happy too as they get to stay in my house for free

 

[mike_dublin]

At least it keeps the hotel owners happy.

My mates are all happy too as they get to stay in my house for free

The bar, restaurant and shop owners are probably less happy about it.

 

[Sparky]

The hoteliers were very happy so they increased their prices but it backfired and bookings fell, so much so that they had to offer discounts, in some cases up to 50% .

Bar and restaurant owners have definitely suffered and so have the staff who work in the industry.

 

[Miller]

https://www.majorcadailybulletin.com/news/local/2020/02/17/62799/balearic-holiday-rental-slump.html



see fill article on the MDB website

I do not want to be pernickity but 2,000,000 is a 20% reduction from 2,500,000 not 25% or 1/5th as we used to say.
We must watch out for false news!!!

 

[Gommar Goffer]

I do not want to be pernickity but 2,000,000 is a 20% reduction from 2,500,000 not 25% or 1/5th as we used to say.
We must watch out for false news!!!

They are clearly not great at maths. They ahve obviously based their 25% reduction on the figures of 500,000 and 2,000,000!