Solvia: Buy-to-Let Returns Reach 11% in Alicante

3 March 2018 – El Mundo

If you want to generate some decent returns from your savings and are thinking about getting into the world of real estate, to buy a home and let it out, then the best options in Alicante can be found in the neighbourhoods of Carolinas Altas and Bon Repós, where rental yields currently exceed 11%. The lowest returns are being recorded in the centre and in the old town, with 5.8% and 5.6%, respectively. That is according to the report Solvia Market Overview: Alicante, the forecast for 2018, prepared by Solvia, the real estate arm of Banco Sabadell.

The analysis indicates that in the local rental market “prices are rising at a faster rate than sales prices, taking the average rent to €614/month, up by 9.6% compared to one year ago”. Tenants paid €6.6/m2/month. The stock of rental homes has increased to 3,297 units, up by 0.5% compared to the previous quarter. The average return on a rental property in Alicante amounts to 6%, which significantly exceeds the returns generated by other conservative investment options such as bank deposits and treasury bonds, whose yields are in tatters. The average return on rental properties across Spain is 6.1%.

The most expensive rental prices are located in the centre of the city: €8.65/m2/month, which means that for a 90m2 home, the monthly rent amounts to around €778 on average. Playa de San Juan is the second most expensive location, at €8.61/m2/month, which corresponds to an average monthly rent of €774.

The most affordable areas are La Florida Alta and Florida Baja, with rents of €5.64/m2/month and €6.23/m2/month, respectively. Moreover, the most profitable neighbourhood for a landlord to rent out a flat is Carolinas Altas. The €560 that can be obtained for the rent on average, taking into account the sales prices in the area at the moment (around €60,000 per property on average) allow for the generation of a return of 11.2%; that is much higher than, for example, the dividend yield of any company listed on the Ibex.

Upwards trend

In its report, Solvia highlights that the forecast for 2018 is that house prices “are going to continue to rise in the city, with an expected increase of 5.3%, slightly below the 6.1% that is forecast for the whole of Spain”.

Property prices in Alicante recorded a YoY increase of 4.1% at the end of 2017 to reach €1,258/m2, above the national average. Specifically, second-hand properties reached a sales price of €1,207/m2, whilst new build homes cost €1,653/m2. “The amount per square metre is still considerably lower than the highest peak, reached in 2007 in the case of second-hand homes (€1,765/m2) and in 2008 in the case of new build properties (€2,041/m2). The most expensive areas are in the centre (€2,250/m2), the old town (€2,126/m2) and Playa de San Juan, where prices have soared by 9.7% over the last year.

Original story: El Mundo (by F. D. G.)

Translation: Carmel Drake

ST: Housing Becomes Investor Safe Haven Once More…

20 January 2015 – Cinco Días

…in the face of stock exchange volatility.

Experts forecast more sales in the future but do not expect significant price rises.

Refurbishments, rental and tourism are the three key niche areas for housing.

The housing market is preparing to emerge completely renewed from its worst crisis in recent history. Or at least that is the view of the latest study conducted by one of the main real estate valuation companies, Sociedad de Tasación. All of the parameters that drive the market are in better shape today than they were a year ago and that, coupled with the challenges facing this activity, means that forecasts are much more optimistic.

The CEO of Sociedad de Tasación, Juan Fernández-Aceytuno, said today that property prices are showing a clear trend towards “stabilisation”. Particularly, in used homes, where the growth in demand has caused smaller price decreases and even the first annual price increases. “In resale homes, we are seeing very clearly that prices have bottomed out, whereas for new homes, if all of the other variables fall in line with our expectations, then prices should reach their minimum levels at some point this year”, said the CEO of the real estate valuation company.

Refurbishment and rental

Speaking of variables, Fernández-Aceytuno, cited three key parameters: employment, purchasing power and finance. Continued improvement in the labour market will be crucial for ensuring that demand for housing continues to increase, now that the banks deem determined to re-establish the flow of credit. “In fact, all indicators show that, as at the end of previous crises, demand is building, as potential buyers wait for prices to come down to the desired level or to the level that they consider they can afford. As soon as that happens, sales will increase” said the CEO of Sociedad de Tasación.

This indicates that over the short to medium term, the market will see more sales without necessarily having to raise prices. And this does not even take account of the fact that some of the circumstances that occurred in the early 2000s, when the last boom in property prices began, are now repeating themselves.

And it is now, like then, that experts believe that housing is regaining its traditional appeal as a safe haven in the face of low returns on deposits and the high volatility of the stock market. With the euro, oil and other commodity prices all in decline, it is inevitable that investments in property and gold, amongst others, become more attractive, explain analysts. In addition, uncertainty exists overseas.

“We see more clouds on the horizon outside of Spain that within it. We are concerned by the situations in Russia and Greece, by terrorism, by how the deflationary situation in Europe will develop in the face of economic and price growth in the US. In Spain, the evolution of the economic situation is critical”, noted Fernández-Aceytuno.

Asked whether international investors seem concerned about the rise in political groups such as Podemos, the CEO of Sociedad de Tasación was keen to minimise the effect that such factors have on the decision-making of companies investing in Spain. “As you would expect, they ask about Podemos, Cataluña and corruption, but we are not aware of any project that has been halted for any of those reasons”, he said.

In terms of future challenges, refurbishment, rental and tourism are the three areas in which experts at the real estate valuation company expect to see the highest growth. In refurbishment, because 90% of existing homes do not meet the requirements of the 2006 technical code. In rental, because buy-to-let is one of the fastest growing trends in the market given its high yields (depending on the area, yields can exceed 6%). And finally, tourism because statistics show that up to 12 million travellers will stay in houses instead of hotels every year, “tourism represents a huge niche in which hotels can compete by buying homes, refurbishing them and offering them up for rent”.

Original story: Cinco Días (by Raquel Díaz Guijarro)

 Translation: Carmel Drake