Bank Of Spain: Average Housing Yield Amounts To 8.8%

30 April 2017 – Expansión

Housing is still one of the most profitable investments. The net return from buying a home to put it on the market to rent, now amounts to 8.8% on average. That is according to data from the Bank of Spain, which takes into account not only income from the rental of properties, but also the annual appreciation in their values. In other words, if the rental of a home generates an income of 4.4% and the price rises by 5% in twelve months, then its total return would be 9.4%. And that represents an attractive yield, well above the rates being offered on debt and deposits. Moreover, in some places, the real estate market is offering even higher returns.

To this end, Expansión has identified the districts in Spain’s five largest cities where investors can earn more than 10% from buying a home. And the conclusions are clear: 9 out of the 10 districts in Barcelona and 12 of the 21 districts in Madrid already exceed that percentage. In Valencia, 10 of its 19 districts generate returns of more than 10%; in Sevilla, only 1 out of 11; and in Zaragoza, 4 out of 12.

The most profitable districts are concentrated in the Catalan capital, above all due to the very high appreciation in property values there. Ciutat Vella leads the ranking with 27.7%, followed by Eixample (22%) and Horta-Guinardó (20.5%). That same percentage is also being generated in the Madrilenian district of Hortaleza (20.5%), which is not one of the most selective neighbourhoods, but, prices are rising quickly there nevertheless. It is followed by the Centro district of the Spanish capital (19.8%). Following those five, the ranking continues with Rascanya (Valencia) and Tetuán (Madrid), both with a gross annual return of 18.9%.

In the most exclusive neighbourhood of Madrid (the district of Salamanca) the figure is 13.9%. In Sarrià-Sant Gervasi (Barcelona), the average return is 9.8%. Other prime locations such as Chamartín (14.6%) and Gràcia (17.9%) are also very attractive. (…).

“The increase in returns in the city centres is happening due to a cocktail of senior boomers (the generation born in the 1960s) returning to the city centre and the huge boom in tourist rental properties”, said José Antonio Pérez, Director at the Real Estate Practice of the ‘Instituto de Práctica Empresarial’. That means that “now is a good time to buy a small flat or a small building to turn it into apartments for tourists”, said Pérez. (…).

But, investors should not limit themselves only to the large cities to find attractive investments. “Savers should also buy tourist homes in areas along the coast where there is already a lot of demand, or in peripheral areas of large cities that are well connected or in university areas”, advised Pérez.

The recovery in the residential sector is spreading out across the whole country. Slowly and unevenly, but it is happening. (…).

According to Jorge Ripoll, Director of Research at Tinsa, “The best prospects for investment in housing are located in established areas with active markets that are clearly recovering, such as those in Barcelona, Madrid, Málaga, Valencia, San Sebastián and Bilbao, for example”. They are areas “where asset prices are rising and where there is solvent demand for primary residences from those who cannot afford to buy a home due to their inability to have been able to save in the past”, he said.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

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