More and more residents in the Valencian Community hold a meaningful stake in rental income. While big investment funds or prominent magnates come to mind when thinking about price increases in recent years, the truth is that much of the activity is driven by individuals. They stand both as beneficiaries and participants in the rise of tourist apartments.
According to the latest data from the Tax Office, 311,684 residents in the autonomous region declared income from this activity in 2021, the newest year available, marking a 5% rise from the previous year and an increase of 28% compared with five years earlier, roughly 68,000 more people.
The growth is even clearer in monetary terms. The activity generated 2.273 billion euros in 2021, up from 1.657 billion euros in 2016. This 37% jump reflects not only a larger portfolio of rental properties but also higher rental prices. These figures refer to individual income as reported on personal income tax returns.
In this sense, it should be noted that the overall figure has risen by 10% in the last year alone, and it still does not include the biggest rent increases recorded in 2022 and 2023.
more control
Antonio PerezRovira, chair of the Financial Committee of the Alicante College of Economists, attributes the rent rise declared in tax returns to several causes. The first is tighter fraud control by the Tax Office, which uses increasingly sophisticated methods to detect activity in properties that owners claim are vacant. From electricity consumption to cross-referencing data from different taxpayers, there are several gaps that the Treasury does not monitor in real time.
Buying or renting a house? This is the situation in Alicante
However, Pérez Rovira notes a growing trend: more citizens are choosing to put savings into bricks to profit from rent, or to place on the market properties they already own, even if only for a few months a year, in response to rising tourist demand. He explains, “I have clients who rent out their own homes during the summer while they stay elsewhere with relatives, and they see strong profitability. This includes chalets in towns like Xàbia, where profits can reach 18,000 to 20,000 euros in a season via internet platforms.”
In every scenario, the typical rents reported to the treasury remain substantial but vary widely. The average declared rent in the last year was 7,295 euros. It should be noted that roughly two-thirds of declared rents correspond to habitual residential dwellings. Profits from this non-tourism path are generally less lucrative but offer tax advantages, as profits from this method benefited from a substantial cut previously. About 60% of the prior profit rate was eliminated.
With the new Housing Act, that rate has been reduced further to 50% on average, though it can rise to 90% for landlords who agree to limit rents in stressed areas.
facilities, the most profitable
In this context, the latest Idealista portal report for Alicante shows that the cost efficiency of buying a home to rent in the traditional market stands at 6.7%, significantly higher than the 1.64% offered by banks’ time deposits in April according to Eurostat, and more than double the 10-year Spanish bond yield. Offices can reach 7.8% and commercial buildings up to 8.3%. The least profitable segment in Alicante is parking spaces at 4.9%.
More and more people from Alicante live in rental or inherited homes
It remains to be seen what impact the new housing law will have on the market. Some reports, such as Tecnocasa’s, suggest that income caps and regulatory uncertainty could pull as many as 100,000 homes across Spain, while other sources argue that these properties have already been converted into more profitable tourist rentals.
In the hands of middle-class taxpayers
According to the Tax Office’s latest personal income tax statistics, about a quarter of Valencia Community taxpayers who declare rental income belong to households earning between 30,000 and 60,000 euros annually. Naturally, those earning the most tend to have higher-value properties or more units. The average annual rental income stands at 7,295 euros, while those declaring earnings above 600,000 euros per year report an average of 24,949 euros.
[Fuente: Agencia Tributaria; registros de ingresos por alquiler en la Comunidad Valenciana]