29 January 2016 – Cinco Días
At the beginning of the economic crisis, rental housing became the preferred option for those who could not afford to buy a house, either due to personal circumstances or because of the credit lockdown. Those people were called tenants by obligation, but increasingly they have been joined by tenants of conviction, citizens who can actually afford to buy homes, but who instead choose to be tenants because of their reluctance to take on debt (a mortgage) with a 20-year (or more) term.
And as the short and medium term outlook has improved, the creation of employment has accelerated and financing has returned, a new group has joined two these two categories of tenants – namely, buy-to-let purchasers. There are even cases involving tenants as buyers (of other properties) – they are people who manage to save up enough money to buy a home, but who decide to let it out and continue as tenants themselves elsewhere. (…).
In addition, the figures are beginning to show that this market could be facing one of the best moments in its recent history. The internet portal Fotocasa.es has just published its annual report about the rental sector, in which it concludes that last year, the average price of homes for rent increased by 3.6%. That represents the first YoY increase since 2007 and the highest that year too, which is when the portal began compiling these statistics.
For the company’s managers, the increase in rents is the result of the explosion that the (rental) sector has experienced in recent years, as well as the change in mentality in favour of rental properties. “Moreover, the high returns that this market offers, up to 5% according to our data, have encouraged many investors to buy homes for the purpose of letting them out”, explains Beatriz Toribio, Head of Research at Fotocasa.es.
By autonomous region, only the Páis Vasco recorded a slight decrease in rental prices, of -0.3%. By contrast, last year, rents shot up by 10.7% in Cataluña, where much of the demand is concentrated.
Idealista has also just published a study, which shows that real estate investments, across all products, offered higher rates of return at the end of 2015 than they did a year before, with the exception of offices. (…). To calculate the average gross return on a rental home, Idealista divides the average sales price of homes, in m2, by the average rent requested by owners. In the residential sector, this calculation results in a gross yield of 5.5%, above the figure in 2014 (5.3%).
Similarly, the study analyses the returns generated by other products, such as retail outlets, which are currently the most profitable investments, with an average yield of 7.3%, followed by offices, at 6.6% (6.7% last year).
By contrast, garages were once again the assets that generated the lowest returns, at 4.4%; however this figure represents an improvement with respect to the return obtained a year before (3.6%). Once again, as is usual in this sector, returns vary significantly by region.
Llérida is the most profitable city in which to rent a house, since the average gross return for landlords there last year amounted to 7.9%. It was followed by Las Palmas (6,4%), Palma de Mallorca (6,2%), Alicante (6%) and Huelva (5,9%). Yields in Barcelona amounted to 5.4%, a tenth higher than the returns in Madrid (5.3%). Orense (3.4%), San Sebastían and La Coruña (both 3.6%) were the least profitable cities for leasing a home.
Original story: Cinco Días (by Raquel Díaz Guijarro)
Translation: Carmel Drake