Buy-To-Let Properties Generate Returns Of 10%+ In Spain’s Large Cities

30 May 2017 – Expansión

Buy to let / The gross annual return from buying a home and putting it up for rent amounted to 4.3% in the first quarter of 2017, according to the Bank of Spain. If we add to that the fact that the price per square metre rose more sharply than during the previous quarter, then the total return exceeds 9%. And the equivalent figures are in the double digits in the largest provincial capitals.

After seven years of crisis and three years of recovery, investment in housing is now enjoying a new golden age. Without the excesses of yesteryear and with the lesson of the bubble very much learned, professionals and individuals alike have set their sights on the residential sector once again as the generator of profits. (…).

The major indicator in the sector nowadays is not so much house prices – which are still important – but rather returns. In the main Spanish provincial capitals, the average gross yield from rental homes is 5.93%, according to a study of the yield on rental homes in 2017, compiled by Invermax. (…).

That 5.93% is higher than the overall average for Spain, which amounted to 4.3% in the first quarter of the year, according to the Bank of Spain. If to this return, we add capital gains, the average gross rate of return per annum increases to more than 10% in Spain. To calculate the return from capital gains, the Bank of Spain uses house price data from INE, which will be published on 8 June. But, taking into account the registrars’ statistics, which revealed an increase of 7.7%, the analysts are convinced that the average return, including capital gains, now exceeds 9%. Moreover, in the large cities, these figures are comfortably in the double digits. For example, the annual return in Barcelona is 17.7% and in Madrid, it is 13.4%, if we combine Invermax’s yield data by city with the local prices published by Tinsa. (…).

The economic environment “is completely favouring the yields on these kinds of assets…” said Jesús Martí, author of the report compiled by Invermax, a company that belongs to the Enacom group. “The reasons driving the increase in the gross rental yield are….the fact that house prices in Spain’s major cities have bottomed out, demand is continuing to rise, especially for rental properties…”. Also, unemployment rates in the provincial capitals stand at around 10% and there is a persistent shortage of available homes for rent. (…).

According to Beatriz Toribio, Head of Research at Fotocasa, “The rental market still has a lot of potential in Spain. The country mainly comprises homeowners, but consumers are gradually opening up to the rental culture, as a result of the economic, socio-demographic and employment changes that are happening across Spanish society”, she said. (…).

According to data from Fotocasa, the most profitable autonomous regions for buying a home and subsequently renting it out are Cataluña, Madrid, the Canary Islands and the Balearic Islands, where yields amount to more than 6%. In some towns in Cataluña and Madrid, that percentage increases to 7% in certain areas and even to 8% in one district in the capital, specifically, Villaverde. (…).

And so we ask the million-dollar question once again: Is now a good time to buy a home and put it on the rental market to obtain returns? The general answer from the real estate experts is a resounding “Yes”, with increasingly less hesitation. However, the choice of investment (area, size, features and the level of demand for rental housing, amongst other factors) is fundamental.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake