BdE: Average Yield On Rental Homes Reached 8.4% In Q3 2016

8 March 2017 – Expansión

Housing is once again a safe investment for savers and small time investors looking for high returns and low risk. At a time when debt and deposits are offering very low returns, property is making a name for itself as a safe bet.

Buying a home and putting it up for rent offers an average gross return of 4.4% per annum. If we add to that the appreciation in property prices over 12 months – in other words, the latent gain – then that figure increases to 8.4%. And that number represents the national average; in cities such as Madrid and Barcelona, the rates are even higher, especially in the city centres, where investors are seeing returns of almost 20%, driven by rising rental and property prices.

The figure of 8.4% comes from the most recent data published by the Bank of Spain; it corresponds to the end of the third quarter of 2016. The gross rental yield was 4.4% during that period and INE’s House Price Index recorded an increase of 4%. The official statistics for the fourth quarter have not been published yet, although they are due to be released today. If we consider more recent data from the College of Registrars, the total yield would increase to 10.1%, given that in the fourth quarter of 2016, the average rental yield was again 4.4%, meanwhile prices increased by 5.7%.

The residential sector is set to undergo a year of consolidation in 2017. For starters, property prices are rising significantly. Analysts forecast that real estate prices will rise by around 5% again this year. In addition, sales are growing fast. They rose by 13.6% last year and the forecast is that they will rise by more than 10% this year. At the same time, the mortgage tap is flowing and rental prices are rising steeply: by no less than 15.9% last year.

And so, the million dollar question is, yet again: Is now a good time to buy a home and put it on the rental market to make a profit? The general response from real estate experts consulted by this newspaper is a resounding “yes”, with increasingly fewer concerns. Nevertheless, the choice of investment is fundamental. For example, Jorge Ripoll, Head of Research at Tinsa, points out that it is best to buy “small flats in established areas of large cities, as they tend to enjoy more liquid rental markets”.

Original story: Expansión (by J. M. Lamet)

Translation: Carmel Drake

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