Buying for long term letting is a relatively new phenomenon in Spain, but times are changing, and in many cases it is foreigners that are leading the way.  A combination of public sector incentives, tax breaks and grants are all adding up to make the country one of the most attractive in Europe for the buy to let investor.

As the Buy to Let markets become overcrowded in the UK and Ireland, Tenerife Property Shop report that an increasing number of these investors are selling property in the UK, and buying in Tenerife.

The Spanish property market has spiralled in value for many years, putting prices beyond the reach of many younger people.  Spain has more 22-30 year olds who still live with their parents than any other country in Europe.  In order to reverse the trend, the government has introduced a raft of grants and incentives in order to encourage them to rent their own homes.  From tax rebates to monthly subsidies of over 200 euros and a handout of 600 euros towards a deposit, the government has been pulling out the stops.

But it is not just young people that the government hopes to help wirh the rent.  Recent changes in the law mean that all renters with annual incomes under 24,000 euros  are now eligible for the same tax rebates as tax payers with mortgages. 

As well as tempting renters onto the market, the government has also been doing the equivalent for property owners.  Many owners have preferred to leave their second homes empty, and it is them who are being targeted by the incentives.  Experienced Buy to Letters have been sitting up to take notice, because these are benefits that they can take advantage of as well. 

The government has set up a super-rental agencyâ called the Sociedad Publica de Alquiler, in order to promote properties.  Renting through this agency guarantees your income (regardless of whether the tenant pays or not) and the condition of the property, removing the two largest doubts that potential landlords have. The agency will even assist with legal issues. 

Whether renting through the agency or not, many expenses are tax deductable, and only half of your rental yield is liable for tax. Grants are now available for refurbishing property if it is to be used for rental.  Insurance companies are scrabbling to compete with multi-risk policies that cover rental income, as well as the cost of repairs after a tenant has vacated. 

So far, the rental Agency has accepted over 25,000 properties onto its books, and rented out about 6,000 of them.  Of young people receiving grants, the government expects to assist some 360,000 in 2008, the first year that the scheme has been in force. At the same time, laws on rental which have favoured the tenant, making eviction very difficult in the case of non-payment of rent have been reviewed.  Landlords are now much more in control.

The news of these new incentives has reached the specialist press in the UK, and Tenerife Property Shop report that buy to let owners are now cashing in their UK properties, in order to invest in local long term rental market.  Landlords are particularly interested in areas of high population growth, and Tenerife has one of the highest in Europe.  With a steady growth in rental demand, as well as more beneficial tax rates, this trend is likely to continue.  Figures from Kyero.com show that over the last year, enquiries for long term lettings have trebled in number. 

Buy to let has been becoming less lucrative in the UK for some time,commented Mary Spencer, a Director of Tenerife Property Shop. The influx of these new investors into the Tenerife market has been building over several months, to the point where we can now identify it as an accelerating trend.  Despondent with returns in the UK, these investors are even calling Tenerife a Buy to Let Paradise.

The company have even gone as far as to identify specific property portfolios suitable for this style of investment and offer specific advice to prospective investors.