In our past articles we covered an interesting number of different jurisdictions including The Côte d’Azur in France, Croatia, Portugal, Ireland and Denmark amongst other European countries. My readers will somehow wonder why did I not write about places like the Costa del Sol in Spain or the Granada coast with its charming villages like Almunecar or La Herradura. The reason for this is that most travelling Llanitos know those areas rather well and I would not bring a lot of new things for them to know about investing in areas so popular with the locals of Gibraltar.

In my last article, however, I did speak about Asturias in Northern Spain, where one feels as though they’re in Ireland or Wales and yet one can motor up there in a day, or fly in just over an hour from Malaga – and it is great value for money. The British have discovered Santander and now they are moving slowly towards Asturias. They do tend to go to the right places and invest at the right time. Back to other areas in Spain we will cover a jewel of a city, Cadiz, and its charming historic centre, the sometimes-called ‘Spanish Havana’.

Cadiz is grossly underrated as far as property prices are concerned.

Cadiz is grossly underrated as far as property prices are concerned. One can still pick up a beautiful 2-bedroom 2-bathroom flat that has probably been fully restored and tastefully decorated for little more than €2000 per m2, sometimes considerably less. It is interesting to know that just before 2007 prices in the city raised to almost €3000 per m2. This was just before the market crashed in the winter of 2008. The market is expected to have more stable prices and €2000 per m2 is extremely good value. It looks like there is only one way to go and that is upwards, but probably not overnight. A good size flat of 120m2 will cost about €240,000, and it will surely be within walking distance to one of the most beautiful beaches with miles of golden sand. Great value for money. In addition, Cadiz is a city with a huge potential as a tourist destination, with no closed season. It has culture, gastronomy, and the best beaches one can dream of. It has a beautiful historic old centre and masses of cultural events including its famous carnival held every year in winter.

Cadiz is an ancient city founded by the Phoenicians in 1104 BC. It is one of the oldest continuously inhabited cities in Europe. It has an important University and a major port. It competes with other major cities like Malaga or Granada without having reached its full potential. We should not forget that Malaga, now a major tourist city with all its famous museums and great cultural attractions, was a run-down city 25 years ago. Like many European cities, Cadiz is undergoing a major facelift as it happened to Sevilla and Cordoba decades before.

The secret in property is always to get there first. The old saying “If you see a bandwagon it is too late to jump on it” is very true, particularly when it comes to property investment.

What about rental yields in Cadiz? The answer to this question is a little more complex than, say, if we were talking about rental yields in Sevilla or Granada. The main reason is that when talking about a rental market and its relevant yields of return Cadiz does not have one market but several different markets. These will yield different rates of return and each investor should consider which one suits him better.

For example, there is the traditional residential market which caters for people that for one reason or other do not wish to buy and decide to rent long term. We are talking a three- to five-year minimum period with yearly increases which are related to the General Cost of Living Official Index IPC in Spain. These yields are between 4% and 6% on your investment. It is a stable figure and one must not expect to obtain a lot more than that.

Then one has to think of the student accommodation as the second market. This market if properly managed can be a small goldmine. The secret is to buy a large flat and obtain as many bedrooms as possible. One can then rent the rooms separately and work out a deal from mid-September to mid-June with very decent rates of return, which should be well over 6%, with the added bonus of being able to rent out per day or week during the three summer months. The rates of return for peak season could go up considerably. Probably well over 15% or even 20% of your investment in proportion for these peak period summer lettings.

In addition to these three markets there is a further market which is a tourist market year-round. Your rental yields could soar to much higher levels. Probably along the figures of 20% or more depending on how long you decide to let them for. If you do it purely as a business the yields could reach rather impressive levels. But again, like in any business, there will be a strong element of work to be accounted for and expenses to manage it. Nothing unusual and if well planned it can become an excellent source of income. Bookings and marketing are done primarily online using the usual OTA agencies like Airbnb, Homeaway or Rentalia to name but a few, and they often do a remarkable job getting you plenty of business.

And what about taxes? Corporation tax in Spain stands at about 25% on your net profits. Similar to most European jurisdictions, but much higher than Gibraltar where corporation tax is just 10%.

On a personal level, Spanish non-resident taxes are slightly higher than in Gibraltar, but lower than in France or Italy.

What happens when I sell on the property and I happen to make a substantial profit?

As explained before, corporation tax is levied at 25% on the net profits. If we get taxed as an individual owner who is a non-resident, we are talking of a tax rate of 19% of your net profits. In addition, there is a smaller local tax called Plusvalia which must be accounted for. Quite reasonable if compared to other European neighbouring countries like France or Portugal.

The good news, you are merely ninety minutes away from Gibraltar, which for some is a very strong point to consider.