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Thursday, May 31st, 2018

Long-term rent is stabilised in the Valencian Community

The property owners opt for long-term rentals due to the new regulatory framework and the advantages that it offers

The tourist rental housing regulation within the Valencian Community is encouraging the commitment to long-term and stable stays.  As Rimontgó states in the article published in El Economista this month, the commitment to a permanent rental yields more benefits and is a more secure option for buyers interested in purchasing a property for investment. The advantages of this method are the continuity, a better cared-for property, fewer neighbourhood complaints, better management flexibility and a beneficial taxation, as we develop below.

The Valencian Administration prepares a Ley de Turismo, Ocio y Hospitalidad (a Tourism, Leisure and Hospitality Decree), whose purposes are to regulate touristic or holiday rentals in the most effective way.  The rule is mainly motivated by three derived factors from the overwhelming growth of these properties. Firstly, the objection of the hotel management (Hosbec) which they estimate is a direct competition; the neighbour complaints due to disturbances caused and, finally, the decline in number of properties for traditional rent. Cities such as Madrid, Barcelona, and Palma de Mallorca have also acted to remanage the situation.

The new regulatory framework of the Valencian Community allows the owners of  tourist apartments to continue with their activity, so long as they are registered in the Regional Tourism Registry of the Generalitat and (most importantly) they have to be situated on the ground floor or the first floor. In this respect, the owners of buildings dedicated entirely to holiday rentals will need to process a license similar to those of traditional hotel establishments. The real estate portals can only publish houses duly registered and must collaborate with the Administration in case of information claim.

At this point, for those buyers interested in purchasing a property for investment, we understand the long-term rental as a more secure option for various reasons.  Even though in the first instance we can sense that the profitability in the holiday rental property is greater, for this, it is almost vital to have a very high degree of monthly occupancy.  The permanent rent saves the owner time in managing the property (documentation, paperwork, etc.) and yields a beneficial taxation (only the first income band, up to 60%).  Additionally, to house the same tenant/s for a long period of time means the degree of deterioration to the property is lower and it saves on repairs.

Not having to constantly select profiles  also reduces the possibilities of having nuisance tenants, which results in fewer complaints from the neighbours.  With a long-term rent, it goes from the tourist, to the professional who moves to the city for work reasons or a family that wants to live temporarily before buying a property, and even retired couples with a high purchasing ability.  Ultimately, a type of tenant who guarantees a secure and constant profitability, as well as providing the owner with a greater peace of mind and security in the management of the property.

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