Spain remains one of the most attractive markets in Europe for rental investment. But beware: returns vary significantly depending on the city, the regulations and the strategy adopted.

In Spain, the legal framework for tenancies is set out in the Urban Leasehold Act (Ley de Arrendamientos Urbanos – LAU), published in the Official State Gazette (BOE), which serves as the legal reference for tenancy matters. https://www.boe.es/buscar/act.php?id=BOE-A-1994-26003 

The following is what you need to know to invest safely, profitably… and wisely.

Where to invest in Spain? The most profitable cities in 2026

Which Spanish cities offer the highest rental yields? ?

The cities currently offering the best rental yields in Spain:

• • Lleida (Lérida) → ~7,5 % à 8 %

• • Murcia → ~6,5 % à 7,5 %

• • Huesca → ~6,5 % à 7 %

• • Zaragoza (Saragosse) → ~5 % à 6 %

• • Jaén, Zamora, Ciudad Real

Why? Because purchase prices are still low compared to the Spanish average, local rental demand remains stable and buoyant, and there is less pressure from foreign investors.  

Cities offering a balance between returns and security

• • Valencia → ~5,5 % à 7 %

• • Alicante → ~4,5 % à 5,5 %

• • Seville → ~5 %

This is the ideal investment for a non-resident investor seeking stability and liquidity

The big cities with lower returns but a better wealth management strategy

• • Madrid → ~3,5 % à 4,5 %

• • Barcelona → ~3,8 % à 4,8 %

The main advantages of investing in these two cities are: strong rental demand in a very buoyant market and better long-term appreciation of your property.

Understanding rental profitability in Spain

The average gross profit margin in Spain is  5,5 % à 7 % and a clear average of 3,5 % à 5 %

It should be added that, in practice, approximately 30% of gross revenue is absorbed by operating costs

Data on rental profitability in Spain is based in particular on analyses from platforms such as Idealista https://www.idealista.com/ et sur les statistiques publiées par l’Instituto Nacional de Estadística : https://ine.es/

A simple calculation:

Gross yield = (Annual rent / Purchase price) × 100

 Net yield = (Rent – service charges) / Purchase price × 100

A practical example:

Purchase price : 200.000 €

Annual rental income :12.000 €

Annual charges of €4,200 per year

A gross return of 6% but a net return of 3.9%

Oficial rentals in Spain

Long term

• • Until 5 years

• • Stable income

• • Strong tenant protection

Holiday rental

• • Short term

• • Mandatory tourism licence and its official register

• • High profitability but strict regulations and restrictions across the entire coastal zone

Temporal Rental

• • Students, placements, mobility

• • Must be justified and specified in the contract

• • Legal risk if misused

La Rental tax in Spain for non-residents

• • Résidents UE : 19%, but the expenses will be tax-deductible

• • NON UE 24% before deduction of expenses

• • Annual tax return: Form 210

To anticipate:

• • Tax on unlet properties (~1.1%) depending on the region

• • 3% withholding tax on resale IRNR tax

What type of investment should you choose?

New Properties

No renovations works and more security
✘ Less profit

Existing properties

Higher profit
Capital gains potential
✘Management of renovation works

Turnkey investment

Passive income
Outsourced management
✘ Less flexible

Focus 2026 : The Catalonia region changes investments rules

From the first of january of 2026, Catalonia is implementing a major reform that strictly regulates the location saisonnière (« alquiler de temporada ») ainsi que la location de chambres.

Until now, these leases offered greater flexibility: unregulated rents, short terms and few restrictions.Today, this model is undergoing significant change.

Rent caps, mandatory justification of the lease term, new contractual obligations: the legal framework is now becoming more akin to long-term letting.

If you are , already , a property owner or a prospective property investor in Catalonia, it is essential that you incorporate these rules into your strategy; otherwise, you risk seeing your returns decline

Why has Catalonia reformed the short-term rental sector?

In recent years, many properties have moved away from the traditional housing market and are now being offered on short-term leases, often at higher rents.

The authorities’ aim:

• • prevent circumvention of the rent cap

• • Protecting access to permanent housing

• • to reduce speculation on short-term contracts

As a result, Law 11/2025, which came into force in early 2026, significantly tightens the regulations.

Which properties are impacted by the new law in Catalonia?

The regulations apply to:

Holiday rentals for residential use

Room rentals, flat-sharing, co-living

These types of contracts are now clearly regulated by the Urban Leases Act (LAU).

It should be noted that tourist rentals with an official ‘tourism’ licence (such as Airbnb or holiday rentals) are not subject to the rent caps under the LAU Act; however, they are subject to a separate set of regulations (tourism).

What impact does this have on the profitability of a rental investment?

In practical terms: less pricing flexibility and more limited short-term returns
coupled with a significant administrative burden

But also: a more stable market, less speculative competition and a more secure long-term outlook, but profitability now depends on:

• • The good situation of the property

• • The purchase price

• • Taxes

• • The choice of the rental term

• • locatif (résidentiel / temporaire / touristique)

Will the reform be extended to the whole of Spain?

A national law on short-term rentals is currently being debated in Congress. Catalonia is serving as a testing ground.

Similar rules could soon apply to Madrid, Valencia, Alicante, Málaga and the Balearic Islands, so investors need to plan ahead now.

Conclusion: Key takeaways on rental property investment in Spain in 2026

The best returns are found in secondary cities
Major cities offer greater long-term capital security
Regulation is becoming a key factor in profitability

Un bon investissement repose sur :

• • The place

• • The purchase price

• • Rental strategy

• • Taxes

• • The choice of the rental term

My expert advice

Investing in Spain remains an excellent opportunity today… provided you have the right support and a good understanding of national, regional and local regulations

Each project must be tailored to the specific requirements

• • Market selection

• • legal approval

• • tax optimisation

• • tailored letting strategy

This is precisely the support I offer my non-resident clients: property search, due diligence, financing and ensuring the rental arrangement complies with regulations.

If you’re planning an investment project in Catalonia or Spain, let’s discuss it.