12 September 2017 – El Mundo
House and rental prices are experiencing a robust increase, which means a perfect combination for the yield on homes to grow and the residential market to attract investors. In this context, according to the XXV Housing Market Report prepared by the Tecnocasa Group and the Universidad Pompeu Fabra (UPF), 28.7% of the second-hand house purchases closed during the first quarter of 2017 were made for investment purposes.
In fact, the volume of investors buying homes is higher than ever recorded by Tecnocasa and has almost doubled since 2013 (16.3%). “Investors are still finding good opportunities, as well as generating high returns from renting homes out”, says the study.
Tecnocasa took the opportunity to perform a detailed analysis of the investor profile. The first noteworthy fact is that this buoyant demand is coming from people who are older than those typically buying their first home. Specifically, more than half of the investor buyers are aged 45 years old or above. In terms of their employment status, 37.38% are self-employed, 36.18% have permanent contracts and 14.66% are pensioners. The self-employed and pensioner cohorts are both purchasing more for investment purposes than for their primary residence (11.96% and 10.28%, respectively). In terms of the nationality of the residential investors, Spaniards exceed foreigners hands down (85.9% vs. 14.1%).
The large increase in investors, to record levels, is not complaining at the sight of the juicy returns that homes are generating in comparison to financial products, given that the price of money is fixed at 0% and shows no sign of rising. Meanwhile, according to the Bank of Spain, the average home in Spain generates a return of 9.5% – a percentage that reaches the double digits only for tourist properties in certain areas of large cities. Of that gross figure of 9.5%, 4.3% comes from the rent itself and the remainder represents the gain from increasing sales prices.
That is because second-hand house prices rose by 8.24% YoY during the first half of the year, according to the study by Tecnocasa, which works with real prices of sales completed by the company itself. Moreover, the market has entered a positive spiral, which has seen second-hand house prices rise for six consecutive 6-month periods. Above all, in large cities such as Barcelona and Madrid, where second-hand properties are the most expensive in the country, costing €2,754/m2 and €1,970/m2, on average, respectively.
According to Tecnocasa, the significant presence of investors in the market is positive. “If it is true (as some people say) that a new bubble is starting to grow, it will be very different to the previous one (and much less harmful) given that it will not be based on loans, but rather on savings”, says the firm. In this sense, the real estate company stresses that 33.1% of primary residence purchases are paid for in cash, a figure that soars to 78.4% in the case of investors (…).
Moreover, the market for second-hand homes seems to have significant upwards potential, given that prices are currently 48.1% below the peaks of 2007, when the average price per square metre exceeded €3,500/m2.
Original story: El Mundo (by Jorge Salido Cobo)
Translation: Carmel Drake