Long-Term Rentals in Ibiza: What Property Owners Need to Know

Ibiza’s rental market tells two very different stories depending on which end of the calendar you are looking at. In summer, tourist demand is fierce, nightly rates are extraordinary, and the island attracts visitors willing to pay handsomely for the right property in the right location. For the other eight months of the year, a quieter but no less compelling picture emerges: a chronic shortage of quality long-term rental stock, a growing population of residents and workers who need somewhere to live year-round, and a landlord tax framework that is considerably more generous than most people realise.

For property owners on the island, the choice between short-term tourist letting and long-term residential rental is one of the most consequential decisions they can make. It affects income profile, tax position, legal obligations, and the practical realities of managing a property from a distance. It is also a decision that is becoming more complex as the regulatory environment around tourist licences tightens further.

Here is what the long-term market looks like in 2026, and what owners need to understand before deciding which route suits them.

The state of the long-term rental market

Demand for long-term residential rentals in Ibiza is, by any measure, extremely strong. The island’s vacancy rate for long-term lets sat at approximately 1.5% in winter 2026, approaching zero as summer approaches. A correctly priced property in a well-connected location typically rents within fourteen days. In high-demand neighbourhoods such as Can Misses, Figueretes, and the Santa Eulalia town centre, that figure drops to seven days or fewer.

The reason is straightforward and structural. Ibiza has a permanent population of around 160,000 people. A significant proportion of those are workers in hospitality, retail, healthcare, and local services who cannot afford to buy in a market where average prices exceed €6,900 per square metre, and who need year-round accommodation. Expats relocating for lifestyle reasons, families priced out of purchase, and professionals working remotely on the island have added further layers of demand to a market that was already supply-constrained.

Rents have risen sharply to reflect this. Average rents across the island reached €25 per square metre per month in early 2026, with premium waterfront areas such as Marina Botafoc reaching €30 per square metre. Rent growth in 2026 is projected at 4% to 8% across the island, though parts of Sant Antoni saw increases above 20% year-on-year in late 2025. These are not numbers that suggest a market in equilibrium. Supply has not kept pace with demand, and the gap between them has been widening for several years.

The legal framework landlords need to understand

Long-term residential rentals in Ibiza are governed by Spain’s Urban Leases Act, known as the LAU (Ley de Arrendamientos Urbanos). Understanding it is not optional. It defines the rights and obligations of both landlord and tenant, and the protections it affords tenants are meaningful and legally enforceable.

The minimum contract duration for a habitual residence lease is five years if the landlord is an individual, and seven years if the landlord is a company. During that period, the tenant has the right to stay unless they choose to leave. The landlord cannot terminate the contract early simply because they have changed their plans, decided to sell the property, or would prefer a different tenant. The right to reclaim the property for personal use requires at least thirty days’ notice and can only be exercised after the fifth year of the lease.

Annual rent increases under a long-term lease are capped. They are linked to a government-set rent update index rather than being set freely by the landlord. On existing contracts, this means landlords cannot simply adjust the rent to match market levels at the point of renewal. New contracts can be set at whatever the market will bear, but once signed, the increase trajectory is capped.

The maximum deposit a landlord can request is two months’ rent for an unfurnished property and three months for a furnished one, under the standard LAU framework. Additional guarantees can be negotiated separately.

For owners who are used to the flexibility of short-term tourist letting, the LAU framework can feel restrictive. The loss of the ability to change tenants seasonally, adjust pricing frequently, or access the property whenever convenient is a genuine trade-off. It is also, for the right owner with the right property and the right expectations, a very manageable one.

The tax case for long-term letting

This is the part of the long-term rental picture that receives the least attention and makes the most difference to net returns, and it is worth understanding in detail.

Spain’s income tax system includes significant deductions for landlords who rent to long-term residential tenants. For Spanish tax residents, rental income from a long-term habitual residence contract can attract a 50% reduction in taxable income as a baseline. Where the tenant is between 18 and 35 years old, that reduction rises to 90%. Where the property is in a stressed rental zone, reductions of up to 90% can apply regardless of tenant age. The result is that a landlord with a long-term residential tenant may be paying income tax on as little as 10% of the rent they receive.

Alongside that income reduction, long-term landlords can deduct a wide range of allowable costs: mortgage interest, the IBI property tax, community fees, home insurance premiums, repairs and maintenance, property depreciation, and professional fees including the cost of a property manager or accountant. The combination of the income reduction and the deductible expenses means that the effective tax position of a long-term landlord is often considerably more attractive than the headline income figure suggests.

Non-resident landlords operate under different rules. They file via the Modelo 210 rather than the standard Spanish income tax return. EU residents can deduct allowable expenses against rental income before tax is applied, at a rate of 19%. Non-EU non-residents, including UK nationals who have not established Spanish tax residency, are currently taxed at 24% on gross rental income with no expense deductions permitted. This distinction matters significantly to the net return calculation and is one of the clearest reasons why owners who are spending substantial time on the island and qualifying for Spanish tax residency should take proper advice on their position.

Long-term vs short-term: the honest comparison

The short-term tourist rental market in Ibiza offers the highest potential gross yields, but it comes with a complexity that has increased substantially in recent years. Licensed short-term properties with strong summer occupancy can generate exceptional income during the peak months of June to September. The average occupancy rate for licensed short-term rentals on the island runs at 65% to 75% annually, with peak season hitting 90% or higher.

The problem is the licence. A complete moratorium on new tourist rental licences is in place until at least the end of 2026, and the direction of Balearic Government policy suggests it is unlikely to ease significantly. Unused licences expire automatically after three years. Fines for operating an unlicensed short-term rental can reach tens of thousands of euros, and enforcement has increased. Net yields for short-term rentals, after costs, compliance, management fees, and the inevitable gaps in occupancy, have fallen from historical levels of 5% to 7% to a more realistic 3% to 4% for most properties.

Long-term residential yields in Ibiza sit at approximately 3% to 4% gross in most areas, which sounds comparable to short-term but comes with a considerably simpler management profile. No changeovers, no seasonal marketing, no platform fees, no cleaning costs between guests, and a tax framework that dramatically improves the net position. For owners who are not on the island year-round and who do not want the management overhead of a holiday rental operation, the long-term route offers something that does not appear in the headline yield figure: peace of mind.

The comparison also depends enormously on the property. A coastal villa in Sant Josep with a tourist licence and sea views is a different asset in a different market from an apartment in Santa Eulalia that suits a year-round tenant. The right choice depends on what the property is, where it is, and what the owner actually wants from it.

What owners should do now

The first step for any owner considering the long-term rental route is to understand their legal position clearly. If the property has a tourist licence, the decision to shift to long-term letting should not be made lightly, as it may affect the licence status. If the property does not have a tourist licence and never will, the long-term market is the appropriate focus from the outset.

The second step is pricing. The Ibiza rental market rewards correctly priced properties with fast lets and quality tenants. Overpriced properties sit empty while comparable stock lets within days. A local agent who understands current market levels is worth considerably more than the saving from managing the pricing yourself.

The third step is contracts. A properly drawn up lease under the LAU framework, reviewed by a Spanish lawyer, is not optional. Disputes between landlords and tenants in Spain are resolved under Spanish law, and a contract that does not meet the legal requirements provides considerably less protection than owners assume.

Everything Ibiza Properties has been advising buyers and owners on the full range of options across the island since 1999. If you own a property in Ibiza and are weighing up which rental route is right for it, we would be very glad to help you think it through.

Read our guide to Ibiza property investment

Rental yields, tax rates, and regulatory requirements are accurate as of July 2026 and subject to change. Always seek independent legal and tax advice before making any decisions about rental strategy or property ownership.