Housing: Which Provinces Offer The Most Attractive Returns?
23 May 2017 – Expansión
Madrid, Barcelona, the Costa del Sol and the Balearic Islands clearly stand out as the most attractive areas.
The Spanish real estate market is enjoying a sweet moment once again. The average price of a home in the country rose by 2% in April with respect to the same month a year ago, which means that so far in 2017, prices have risen by 5% with respect to December 2016, which saw the third consecutive annual rise.
And the outlook for the future is more than promising: Samuel Población, National Director of Residential and Land at CBRE, explains that on average in Spain, price increases of between 4% and 5% are expected, and those percentages will be more marked in Madrid and Barcelona, where increases of around 10% are predicted.
In the case of yields, the panorama is similar. The net return on a rental home (the rate that includes the increase in the price of a home over 12 months as well as the return from renting it out during the same period) now amounts to 8.8% in Spain. On average, rentals in Spain generate returns of between 4.5% and 6% (excluding the impact of capital appreciation), according to Ignacio de la Torre, Partner and Co-Head of the Capital Markets team (at Arcano).
However, the figures reveal that the real estate market is not experiencing a similar boom across the whole of Spain. The best areas for investing in housing are Madrid, Barcelona and their respective suburbs, as well as Málaga and the Costa del Sol, the Balearic Islands and Alicante. Valencia, influenced by the latter, is also recovering and in Valladolid, Zaragoza and A Coruña, we are starting to see signs of improvement, according to José Luis Ruiz Bartolomé, Managing Partner at Chamberí AM.
In Madrid and Barcelona, house prices are rising due to an increase in demand in the context of limited supply, given that the construction of new housing is still a long way below the levels that the country can absorb. 60,000 homes are currently being constructed in Spain, compared to the 150,000 that the economy is capable of digesting.
Typical buyer profiles
The profile of a typical buyer in the city is a family with children and a stable income. They are looking for a home with between three and four bedrooms, measuring between 110 m2 and 140 m2. In the case of investors, they tend to buy properties with 2-3 bedrooms, according to Población. On the other hand, the average tenant is a young person, without children, who does not take out a mortgage either due to a lack of stable employment or because of the effect of the rental culture that is starting to spread amongst the new generations.
Jesús Martí, real estate analyst at Invermax, added that buyers, and above all renters, are increasingly focused on the proximity of their future home to their place of work when it comes to deciding where to live.
The profile of a typical buyer on the coast is a foreign investor. Ignacio de la Torre, Chief Economist at Arcano, says that 15% of the total market for house sales in Spain involve buyers from overseas and that percentage increases to 30% in the case of Málaga.
When it comes to choosing a property for investment, the experts advise buyers to not get carried away by apparent bargains. It could be that the sales price of a property seems cheap, but in that case, it will probably also be hard to generate stable rental income from it.
It is worth considering that just one month’s delay in the payment of rent by a tenant can significantly harm the profitability objectives of a property.
Original story: Expansión (by R. Martínez)
Translation: Carmel Drake