Are you considering purchasing a property in Valencia to use as your future home, but need to explore your options in the meantime? Or perhaps you’re thinking about investing in a second property in the Valencia region? Many of our clients have either purchased or are planning to purchase property in Valencia, with the long-term goal of making it their primary residence or as a strategic investment. However, a common question arises: What are the most convenient and beneficial rental options available?

In Spain, rental agreements are generally divided into three main categories:

Short Stay – Tourist Rentals: Typically listed on platforms like Airbnb and Booking.com, these rentals cater to short vacation stays.

Medium-Term Rentals: These are non-primary residency rentals for fixed periods ranging from 1 to 11 months, such as summer stays or student housing.

Long-Term Rentals: These contracts, valid for up to 5 years, serve as primary residency for tenants and offer the highest protection to them.

We’ll explore all three options in detail, covering the practical, legal, and tax aspects of each, with a particular focus on the real estate market in Valencia.

Understanding Property Ownership Responsibilities in Spain

Once you own property in Spain, you are obligated to pay property tax (Impuesto sobre Bienes Inmuebles, or IBI) and file an annual tax form—regardless of whether you are a Spanish tax resident or how the property is used (whether rented, used by you, your friends and family, or kept vacant). Deadlines, forms, and taxable amounts can vary depending on the property’s use and whether you are an EU tax resident.

For non-resident taxpayers who are not EU residents, the taxable base for leased properties is generally the entire rental amount without any deductions for expenses, and the tax rate is 24%. This is higher compared to the 19% rate applicable to Spanish residents and other EU residents, who are allowed to deduct expenses directly related to the leased property.

Non-resident taxpayers who are natural persons and either use their property for personal use or keep it vacant are still required to file a tax form and pay the associated tax. In these cases, the taxable base is calculated by applying the corresponding percentage (1.1%-2%) to the ratable value of the property, as indicated on the Property Tax (IBI) receipt. The tax is assessed on this taxable base without any deductions for expenses. This amount is calculated for the entire calendar year, but if the property was not owned for the full year or was rented out for part of the year, the amount is proportionally reduced.

You can download the manual “Non-resident’s Taxation” issued by the Spanish Tax Agency here.

1. Short stays – tourist rentals

Short-term tourist rentals in Valencia are regulated by specific laws that limit the types of properties eligible for this kind of business. For instance, only properties on the ground or first floor with a separate entrance, or those in buildings without a ban on tourist rentals, are typically allowed. Additionally, these properties must meet certain standards and obtain a special tourist rental license.

Apartments with “old” licenses issued before the 2018 law modification can still operate in Valencia. However, if an inspection reveals that the apartment does not comply with current regulations, it won’t be sanctioned but will be required to cease its activity. For instance, if a tourist apartment is located on a floor higher than the ground or first floor, its license would be revoked, and the apartment could no longer be rented for short stays.

According to the Spain´s National Statistics Institute, the number of properties registered as tourist rentals in the Valencian Community has surged, surpassing 100,000 by July 2024—a 160.4% increase from 2015 to 2023. In just the first half of 2024, more than 9,000 new tourist rentals were registered. This rise has coincided with a record-breaking influx of foreign tourists—10.4 million in 2023 alone (source here). Consequently, there has been increased media attention on the impact of this trend, prompting the need for urgent measures to balance various interests.

On May 30th, 2024, the Valencian government imposed a one-year moratorium on new tourist apartment licenses. This measure aims to curb the rapid growth of tourist rentals amid the long-term rental crisis the city has been facing in recent years.

A recent law, Decreto-ley 9/2024 , has given local town halls more autonomy to limit this type of activity, enforce stricter sanctions, and being more demandant as for the standard of the property and provided services, as well as the newly issued licences will have to be renewed every 5 years. Additionally, there is growing local opposition to gentrification and touristification, with residents actively reporting illegal tourist rentals and sometimes resorting to alternative civil action as a form of protest.

Given the current situation, we do not recommend planning future investments based solely on tourist rental options in Valencia and advice considering other type of rental options instead.

2. Medium-Term rentals

Medium-term rentals, or temporary rentals, are becoming increasingly popular among property owners in Valencia. These rentals offer higher returns, require no special licenses, and give owners more control over their properties.

These agreements are for fixed periods between 1 to 11 months and must be respected by both parties. Regulated by the Urban Rental Law (Ley de Arrendamientos Urbanos, LAU 28/1994), medium-term rentals are not intended for primary residency but are instead designed for temporary stays, such as student accommodation, extended holiday stays, or employee relocations.

Many property owners prefer medium-term rentals as they provide flexibility compared to long-term contracts, allowing owners to use their property occasionally while maintaining control over it.

Even though the rental period is relatively short, the law requires that the legal deposit be transferred to the Generalitat, and the tenant’s personal details, along with a copy of the rental contract, must be provided.

Valencia has a separate market for temporary rentals, with listings advertised on property management company websites, general rental sites like Idealista, and specialized platforms like Spotahome.com.

3. Long-Term rentals

Long term lease is regulated by the same law as the temporary rentals – LAU, and is the most protective contract from all previous ones. These contracts are usually signed for a year and allow tenants to renew them for up to 5 years, or up to 7 years if the property owner is a company. Tenants are required to stay for a minimum of 6 months, but after that, it is the tenant’s right, and the owner’s obligation, to extend the contract.

The only exception is if the property is needed for the owner or first-degree family members as a primary residence. In such cases, this clause should be included in the contract, and when the property is required, the tenant must be notified at least two months in advance after the first year of the rental agreement.

Rent increases are limited to once a year, based on Competitiveness Guarantee Index, with a cap of 3% in 2024. Regardless of future regulations, it is clear that Spanish authorities will continue to enforce rent control measures to prevent property owners from raising rents beyond the established maximum.

As with any income earned from real estate in Spain, property owners must declare rental income and pay the corresponding income tax. One advantage of long-term rental contracts is the partial tax exemptions available for properties rented out as the tenant’s habitual residence, with a general reduction of 50%. However, it’s important to note that this tax reduction does not apply to Spanish non-resident taxpayers.

We hope this insight helps you better understand your options. If you’re considering purchasing a property in Valencia, please don’t hesitate to reach out to us.