Letting a property in Spain

A growing number of people who are looking to retire to Spain are going to be funding their stay in the sun from rental income on UK properties rather than the traditional pension. Many more people are choosing to rent homes in the UK, whilst investment in rental property is now being seen as a long-term alternative to pensions, according to a report from a division of Nationwide.

There are a number of areas in which buy-to-let activity is buoyant, including Bristol, Northampton, Leeds, Manchester, York, Newcastle and the suburbs of a number of major cities, such as Birmingham and Nottingham.
Britain is traditionally a society in which home ownership is a top priority, with 69 per cent owning their homes.
Charles Reed, Managing Director of UCB Home Loans, which is part of Nationwide, suggests we are now becoming a bit more European in being more relaxed about renting.

The amounts borrowed for buy-to-let properties totalled £6.7 billion in the last six months of 2002, compared with £5.5 billion in the first half of the year and £4.1 billion in the second half of 2001. There are now an estimated 275,000 buy-to-let mortgages outstanding worth £24.2 billion.
Rapid house price increases have spurred interest in the buy-to-let market, with prices 17.9 per cent higher than in July 2002 although the annual rate is expected to slow to around 10 per cent by the end of this year. The report shows that interest in buy-to-let purchases is now strongest in more northern areas where house prices are increasing more quickly. Figures produced by the Royal Institution of Chartered Surveyors indicate that the number of private lets has increased from 74 per cent of the total letting market in January 2001 to 82 per cent this year.
UCB Home Loans says that landlords can generally expect to receive between 7% and 9% gross annual rental return in more active parts of the country, and nearer 5% in areas where house price rises have slowed down and the ratio of landlords to tenants is higher.
Those rates of return are considerably better than most private pension schemes are getting at present and the British seem to have got over the shock of seeing house prices fall in the 1980s and 90s.Now that negative equity is not at the forefront of people's minds there is more inclination to see a property as an investment unlikely to fall in value in the long term. At the same time it will provide regular income - at least £5,000 a year on a £100,000 house according to the figures - with the likelihood of a nice little profit when it is sold. Compared with a private pension where values are increasingly under threat it is an attractive proposition.