2 April 2018 – Expansión
The three cities recorded increases of more than 16% during the first quarter, whilst the national average improved by 7.6%. Barcelona offers returns of 8.7% and Madrid 7.5%.
Buying a home to let it out has become one of the most attractive investment options of recent times. The returns offered by renting a home, in an environment of low interest rates and moderate inflation, are greater than other options, such as those generated by debt and deposits. In this way, during the first quarter of 2018, the average rental yield in Spain amounted to 8.2%, according to the Real Estate Sector Trends Report for 2018, compiled by Sociedad de Tasación. Although Barcelona is the province that offers the highest return (8.7%), the overheating of prices there is reducing margins, making it a safer location but with less potential. In that context, Sevilla, Valencia and Sant Cruz de Tenerife are emerging as interesting targets.
The evolution of residential yields in Spain, which soared by 7.6% during the first quarter of this year, suggests a sustained trend over the coming months, favoured by an increase in demand, the strong performance of the economy and the growth in house prices, which rose by 4.3% in April.
The increase in prices is still more pronounced in Spain’s provincial capitals. In Barcelona, for example, prices rose by 10.2% in 2017. In that province, rental housing generated a return of 8.1%, representing an asset with “very limited risk”, according to analysis from Sociedad de Tasación. It was followed by Lérida, also in Cataluña, where rental housing offered a return of 8.45%.
Although prices are high in Barcelona, they have not had an impact on rental yields, something that has happened in other areas, such as the Balearic Islands. The return offered by a rental home in the islands fell by 3.2% during the first quarter. That reduction could be due to the increase in house prices in recent years due to the tourist rental boom, which has reduced the scope for further increases. In Palma de Mallorca, for example, the number of beds from unregulated tourist rental platforms now exceeds the supply of hotel beds by 100%, according to data from Exceltur, which may, in turn, have an impact on prices. In fact, the Balearic Islands is the autonomous region where the most effort is required to buy a home in all of Spain.
An average citizen would need to allocate his entire salary for 14.9 years to be able to buy an average home in the Balearic Islands, twice the national average (7.5 years). That conclusion can be deduced from Sociedad de Tasación’s real estate effort index, which shows that, despite the increase in incomes, buying a home in many cities in Spain is still prohibitive for many.
In this context, markets such as the one in Valencia are interesting. Not only is it the province with the third highest rental yield (8.11%) in the country, it also ranks highly, in second place, in the increases in returns: an increase of 16.7% that more than doubles the evolution of the most profitable province, Barcelona, which saw its yields rise by 5.2% during the first quarter.
In terms of Madrid, although the average rental home in the province offers a yield of 7.46%, which is below the Spanish average, that is due to the differences between the rental market in the capital and other cities in the province.
Sevilla is the province that leads the yield increases. During the first quarter, yields there soared by 17.7%, well above the rises in Madrid (6.2%). In third place was Santa Cruz de Tenerife, where letting a home is now 16.2% more lucrative than it was a year ago.
Original story: Expansión (by I. Benedito)
Translation: Carmel Drake