Tag: buy-to-let

Spain’s Rental Market Is Thriving, Boosted By Buy-To-Let

9 January 2016 – Expansión

Thanks to strong investor appetite / The high profitability of residential investments has increased expectations in the rental market, given that it is the option now chosen by 21% of Spaniards. Experts forecast rental price rises of more than 5%.

The rental market closed 2016 with price rises of 6.7%, but in many large cities, the increases were in the double digits. The difficulties facing young people when it comes to affording a home, the emergence onto the market of hundreds of thousands of homes that were empty and the high returns of real estate investments have increased expectations for this residential option, once forgotten in Spain and which is now the alternative chosen by 21% of Spaniards.

This year, “given that interest rates are not expected to rise in Europe over the medium term, housing will remain attractive as an investment asset”, said Jorge Ripoll, Director of Research at Tinsa. “Speculative demand will push more and more savers towards the sector”, predicts Miguel Cardoso, Chief Economist for Spain at BBVA Research.

In this context, the consensus of the panel of real estate experts consulted by Expansión is that the rental boom will not only continue during 2017, but that the rises may even be larger, especially in the large cities. Julián Cabanillas, CEO at Servihabitat, highlighted that his forecasts indicate an average YoY growth in rental prices “of more than 10%”.

The increase in prices will be “particularly noteworthy in the large cities, whose weight over the national average is also more significant”, added Cabanillas, who warned that: “If prices continue to rise in the double digits, many households will be priced out of the market, particularly those formed by young people”.

The President of Tecnitasa

José María Basañez points out that “during the last few months of 2016, the rental market in Spain was more robust than the market for house sales”, a trend that will continue into 2017, in his opinion. “Therefore, we may well see price rises of more than 5%, on average”. (…).

Other analysts, such as Julio Gil, Chairman of the Foundation of Real Estate Studies, and José García Montalvo, Professor of Economics at the Pompeu Fabra University, think that the rental price rises will be more moderate. Nevertheless, like in the case of house prices, “there will be areas where rental prices will grow more quickly (such as in Madrid, Barcelona, the Canary Islands and the Balearic Islands)”, said Montalvo.

“The rental market is here to stay in Spain. We are seeing a change in mentality, with more and more people convinced that it is the way forward”, says Beatriz Toribio, Director of Research at Fotocasa.

House prices are also rising

Finally, it is worth noting that two new phenomena are being seen in the rental market. On the one hand, rental prices are rising and the volume of house sales are increasing, as Jaime Cabrero, President of the Real Estate Agents’ Association in Madrid, explains. On the other hand, the rise in rentals is making house purchases more expensive, according to Juan Fernández Aceytuno, Director General at Sociedad de Tasación: “The rental market is causing house prices to rise because there are increasingly more investors who are buying properties to rent”. “The high returns offered on buy to let properties are behind the tensions in terms of prices that we have been seeing and will continue to see in 2017”, adds Toribio.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Homes Worth Less Than €100K Experience Highest Price Rises

15 March 2016 – El Mundo

One in every four properties brokered by the Alfa Inmobiliaria network, which has more than 200 agencies operating across Spain and Latin America, does not exceed €100,000 in terms of price. And those homes are precisely the properties that are increasing by the most in terms of price, as well as the ones that are being sold the fastest.

According to the real estate chain, one hundred thousand euros is the maximum amount that many Spaniards are willing to pay nowadays for a home to rent out. “The high yield that these homes offer is generating an increase in the price of this type of home”, says Jesús Duque, the Vice-President of Alfa Inmobiliaria. “That, and the fact that it is cheaper for buyers to purchase a home of this kind to rent. Nevertheless, there are significant differences between what a resident in Madrid or Barcelona can find versus what is available in other cities”.

“This psychological barrier seems to have instilled itself in the minds of buyers, which together with demand from investors”, says Duque, “is what is generating a higher increase in prices – of approximately 10% p.a., and, as a result, faster-closing operations”.

And regardless of whether the home is to live in or is an investment property, “this price bracket is where we are seeing the highest price rises”, says Duque.

The other feature of these operations is that the people making these purchases tend to be small-time savers and individuals who are moving out of home for the first time or buying their first home, and in many cases, they are not resorting to bank financing. “Almost 40% of buyers – and/or their families – have the savings necessary to finance the acquisition outright, which means that these operations are being closed within very short timeframes”, says Duque.

The US housing market has grown by 11%, with respect to the first month of 2015, according to The National Association of Realtors.

In Spain, we expect to see a similar evolution, says Duque. Despite the slow down in the world ecnomy, the housing market is emerging from the situation of paralysis that it underwent during the worst years of the crisis. Just like in the US, we expect to see an increase, not only in the number of operations, but also in house prices”, says Duque.

Original story: El Mundo

Translation: Carmel Drake

Fotocasa: Rental Prices Rose In 16 CCAAs In 2015

23 February 2016 – Expansión

Rental housing represents a safe investment / Average rental prices increased by 3.6% in Spain in 2015, driven by a rise in demand. Price rises were recorded in every autonomous region, with the exception of País Vasco, something that has never happened before.

Spain is a country of property owners. Renting is not the preferred option. Specifically, one in every five homes is rented out, a figure that falls well below those recorded in other European countries, such as Switzerland, Austria, Denmark and Germany (all exceed 35%). Nevertheless, the percentage of renters – which account for around 19% of total demand at the moment, although the Bank of Spain considers that the figure is more like 15% – represents a significant increase since the real estate boom years, when rental housing accounted for just 11.4% of the total stock.

More than 3.5 million of the 18 million primary residences in Spain are rented out. If we also include holiday homes, that figure increases to almost 5 million. During 2012, 2013 and 2014 alone, 1.1 million additional properties were incorporated into the rental market. Why? Because the crisis drove out hundreds of thousands of Spanish families from the market to buy. And that demand has moved to the rental market, where it is driving up prices.

Rental properties have become more expensive in every autonomous community, with the exception of País Vasco, where prices decreased by just 0.3%, according to year end analysis performed by the real estate portal Fotocasa. It is the first time that rental prices have increased in 16 autonomous communities since the portal created its statistical database, nine years ago. The database is used by the Bank of Spain, in the absence of official sources.

Trend

Clearly, the evolution of average rental prices in Spain changed “significantly” in 2015…moreover, the YoY variation recorded at the end of 2015 (3.6%), was also the highest ever in the history of the index. “This general increase in prices is the result of the expansion of the rental market in Spain in 2015; increasingly more people are renting homes, not only because they cannot afford to buy a home, but also because there has been a change in their mentality in favour of renting”, says Beatriz Toribio, Head of Research at the real estate portal.

“In addition, the high returns offered by this market have led many investors to buy homes in order to lease them out”, adds Toribio.

Cataluña was the region that experienced the highest increase in rental prices, up by 10.7%. Rental prices increased all 10 of Barcelona’s municipalities. The average price there stood at €13.3/m2/month.

In the Community of Madrid, the YoY variation at the end of 2015 amounted to 6.5%, which represents the highest increase in the history of the index. In the case of Madrid capital, the rise amounted to 6.9%, where the average monthly rent stood at €11.2/m2. Moreover, rental prices rose in all of the capital’s districts for the first time in nine years.

Outlook

“In general, prices will stabilise in 2016 because the rental market is here to stay in Spain. But its evolution will continue to be very uneven, with rental prices continuing to rise in the main cities on the one hand, but continuing to fall in smaller towns and in neighbourhoods on the outskirts, as well as in regions with low economic activity”, concludes the Head of Research at Fotocasa.

Rental prices in Spain reached their historical high in May 2007, with a value of €10.12/m2/month. Since then they have recorded a cumulative depreciation of 30.7%. The communities that have experienced the greatest decreases are: Aragón (-40.6%), Cantabria (-36.1%), Castilla-La Mancha (-35.5%), Valencia (-34.4%) and Murcia (-32.3%). (…).

Original story: Expansión (by J. M. L.)

Translation: Carmel Drake

Fotocasa: Rental Prices Rose By 3.6% In 2015

29 January 2016 – Cinco Días

At the beginning of the economic crisis, rental housing became the preferred option for those who could not afford to buy a house, either due to personal circumstances or because of the credit lockdown. Those people were called tenants by obligation, but increasingly they have been joined by tenants of conviction, citizens who can actually afford to buy homes, but who instead choose to be tenants because of their reluctance to take on debt (a mortgage) with a 20-year (or more) term.

And as the short and medium term outlook has improved, the creation of employment has accelerated and financing has returned, a new group has joined two these two categories of tenants – namely, buy-to-let purchasers. There are even cases involving tenants as buyers (of other properties) – they are people who manage to save up enough money to buy a home, but who decide to let it out and continue as tenants themselves elsewhere. (…).

In addition, the figures are beginning to show that this market could be facing one of the best moments in its recent history. The internet portal Fotocasa.es has just published its annual report about the rental sector, in which it concludes that last year, the average price of homes for rent increased by 3.6%. That represents the first YoY increase since 2007 and the highest that year too, which is when the portal began compiling these statistics.

For the company’s managers, the increase in rents is the result of the explosion that the (rental) sector has experienced in recent years, as well as the change in mentality in favour of rental properties. “Moreover, the high returns that this market offers, up to 5% according to our data, have encouraged many investors to buy homes for the purpose of letting them out”, explains Beatriz Toribio, Head of Research at Fotocasa.es.

By autonomous region, only the Páis Vasco recorded a slight decrease in rental prices, of -0.3%. By contrast, last year, rents shot up by 10.7% in Cataluña, where much of the demand is concentrated.

Rental yields

Idealista has also just published a study, which shows that real estate investments, across all products, offered higher rates of return at the end of 2015 than they did a year before, with the exception of offices. (…). To calculate the average gross return on a rental home, Idealista divides the average sales price of homes, in m2, by the average rent requested by owners. In the residential sector, this calculation results in a gross yield of 5.5%, above the figure in 2014 (5.3%).

Similarly, the study analyses the returns generated by other products, such as retail outlets, which are currently the most profitable investments, with an average yield of 7.3%, followed by offices, at 6.6% (6.7% last year).

By contrast, garages were once again the assets that generated the lowest returns, at 4.4%; however this figure represents an improvement with respect to the return obtained a year before (3.6%). Once again, as is usual in this sector, returns vary significantly by region.

Llérida is the most profitable city in which to rent a house, since the average gross return for landlords there last year amounted to 7.9%. It was followed by Las Palmas (6,4%), Palma de Mallorca (6,2%), Alicante (6%) and Huelva (5,9%). Yields in Barcelona amounted to 5.4%, a tenth higher than the returns in Madrid (5.3%). Orense (3.4%), San Sebastían and La Coruña (both 3.6%) were the least profitable cities for leasing a home.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Spain’s Rental Market Has Gold Mine Potential

26 October 2015 – Expansión

Spain is a country of property owners, in which less than 20% of homes are allocated for rent. That percentage is a far cry from the figures recorded in major European countries such as Switzerland, Austria, Denmark and Germany (where the rental market accounts for at least 35% of all homes). The rental market began to take off in Spain when the crisis forced thousands of families out of the market for buying properties and into the rental market, but it still has a long way to go.

Companies in the sector see this as a great business opportunity in Spain, according to comments made last week at the Barcelona Meeting Point trade fair. Demand exists and is on the rise, but the supply is scattered and lacks professionalism. In Germany, several companies specialise in the sector, with more than 100,000 homes for rent. In Spain, Blackstone has just 10,000 homes.

“Currently, tenants have to deal with amateurs and individuals; anyone that succeeds in becoming a professional manager of rental housing, with good services, will secured demand in a growing and unsatisfied market”, says Javier García-Carranza, Managing Director of Morgan Stanley in London.

The President of CBRE España, Adolfo Ramírez-Escudero, thinks that now is the right time to develop this segment. “Housing is cheap” for buy-to-let homes. García-Carranza says that the economic incentive to promote this niche in the market is to offer services that increase revenues thanks to their added value. “If we rely only on the appreciation of property prices, we will have a cyclical model, with less recurrent business”, he says.

The percentage of rented homes has risen from 11.4% during the real estate boom to 18% or even 20% according to analysts in the sector, although the Bank of Spain reports a more conservative figure of 15%. Therefore, 3.42 million of the 18 million primary residences in Spain are rental properties. If we also include holiday rentals, that figure increases to 5 million.

Prices, which are now more competitive than ever, have contributed to this situation. The average rental price amounted to €7.02/m2/month in September, i.e. 30% lower than in May 2007, according to the IESE-Fotocasa index. In September, rental prices increased by 1% YoY.

For example, rental prices in Cataluña increased by 2.5% during the first half of the year, for the first time since 2008. In Barcelona, the increase amounted to 6.9%, according to the Generalitat, which notes that the market is beginning to become saturated.

Changing attitudes

The changing mentality is here to stay In 2011, 70% of Spaniards believed that “renting meant throwing money down the drain”, but now 65% regard it as a robust life choice, according to a survey conducted by Fotocasa. “This is partly explained by the crisis and because the younger generations have a much more favourable attitude (towards renting)”, explained Beatriz Toribio, Head of Research for the website.

Another website, Idealista, predicts that the rental market will continue to gain strength over the next few years, to account for around 25% of the total market. “Despite the classic reluctance to rent in Spain, the rental market is now undergoing a period of significant development”, said Fernando Encinar, Head of Research at the company.

Original story: Expansión (by J.M. Lamet and A. Zanón)

Translation: Carmel Drake

The RE Sector Is Showing Important Signs Of Recovery

9 June 2015 – Cinco Días

The recovery in the mortgage market is just one variable that shows that the Spanish economy is continuing to accelerate on more than one front.

The data showing an increase in the number of new loans taken out, after a long period of credit restrictions, is accompanied by statistics that reveal a decrease in the number of mortgage foreclosures, which have decreased by more than 14% since their peak in 2010. In total, 600,000 mortgage foreclosures have been processed since 2007. If we analyse the evolution of this figure since the beginning of the year, the seizure of homes has decreased by almost 7% during Q1 2015, with respect to the same period in 2014.

At the same time, an in-depth analysis of the mortgage sector reveals that the volume of real estate asset foreclosure is continuing to increase for banks, just like is happening with “daciones en pago” (assignment of deeds in lieu of payment). The explanation is that the banks are not managing – or are delaying, due to the disadvantageous market conditions in terms of price – the sale of the high volume of assets that they still hold on their balance sheets. This delay may, amongst other consequences, increase the exposure of Spanish securitisation funds to higher losses, just at a time when the first residential mortgage-backed securitisation in Spain has been subscribed after an eight-year drought. For the experts, the return of these transactions is a clear sign of the recovery in the credit market. Moreover, the fact that financing is beginning to flow again at a time when interest rates are low indicates that there will be faster growth in the housing market.

The signs of revival in terms of real estate transactions are good news, not only for the sector itself and its suppliers, but also for banks, consumers and the economy as a whole. In the case of the financial sector, the return of the flow of credit is opening the door to new financing proposals for the acquisition of real estate assets. This applies to the possibility of creating a specific mortgage loan for investors who want to purchase a home and rent it out, a typical financial product in the UK (buy-to-let). Nevertheless, it seems unlikely that a proposal that combines high risk – particularly in an immature market, such as the rental market in Spain – and limited growth prospects, will be of interest to banks, which today, more than ever, must not only channel their resources in accordance with (strict) solvency and efficiency criteria, but which must also orientate themselves towards higher-yielding, longer term investments.

The challenge for the house market is to start to learn to walk again, and to do so in an orderly and rational way, without repeating the mistakes that Spain has paid for so dearly in recent years.

Original story: Cinco Días (Editorial)

Translation: Carmel Drake

Bank Of Spain: Residential Rental Yields Rise To 5%

18 May 2015 – Expansión

Residential market / The average annual return on rental properties is equivalent to 3.1x the return on public debt – a historical record. Demand for rental property has soared by 42.5% in three years.

After seven-years in decline, it seems that the housing sector is back. The residential market is oozing optimism once again, although it is also full of caution, learned during the post-bubble era, and  uncertainty, inherent in a recovery that is still recent.

But the data is improving and housing has become a good investment once again, above all due to the significant rental returns offered nowadays. Investors looking for yields that exceed those on deposits and public debt are on the hunt for properties in good locations, with high demand, with a view to buying them to let.

The data endorses this trend, since the rental income for a residential property offers an annual gross return of around 5%. On average, 4.7%, according to the Bank of Spain. It is the highest percentage recorded since June 2003, during the height of the housing bubble, although other reports, such as the one published by idealista, puts the figure even higher, at 5.3%.

The gross yield is a percentage of the total price of the house covered by the annual rental income. This yield, published by the Bank of Spain, also takes into account capital gains.

Taking into account the data from the body led by Luis María Linde, the average annual rental yield is no less than 3.1x the return generated by public debt on the secondary markets during the last quarter (1.5%). That is a historical record for this comparative ratio, which dates back to 1991. Meanwhile, bank deposits offer a return of 0.6% each year.

What does all this mean? Simply, that the moment is ripe for investment in buy-to-let housing, especially for small investors. The price of homes is beginning to increase and so are rentals, which means that the market is at an impasse of high returns without much risk. Moreover, the percentage of citizens who prefer to rent rather than buy has risen sharply, from 11.4% in the boom years to the current rate of 19%. In the past three years alone, the rental market has expanded to include one million more homes; it has grown by 42.5%.

On the other hand, the price of homes is starting to rise, specifically by 2.65% during the first quarter of the year, according to the registers. This trend towards stability in terms of property prices points to an easing of returns in the rental market, and so analysts believe that now is the best time to invest (rather than waiting to invest over the next few quarters).

According to the experts, the prime areas of the large cities are those that offer the safest opportunities, due to their significant demand, although without exorbitant returns. For example, the Madrid neighbourhood of Retiro, where the average price per square metre for sale is €3,289 and for rent is €11.6/m2/month, according to the index prepared by IE Business School and Fotocasa. A property measuring 100 m2 with these parameters would have an annual return of 4.2%. A second-hand home measuring 100 m2 in the Goya neighbourhood (Madrid) would have a return of around 4.7%.

“Homes in the best locations are the most attractive to rent. They will go up in price and there is no risk of default or lack of demand”, says the real estate consultant José Luis Ruiz Bartolomé. “It is possible that rental prices will also start to rise, although by less that sales prices. The rental margin will narrow, but that is because certainty will increase as well; I do not see that as a bad thing”, he adds.

And in the peripheral areas? “You have to look at where there is more demand than supply”, says Ruiz. Julio Gil, President of the Foundation for Real Estate Studies agrees: “It is the best option for small investors, due to the returns and minimal risk”.

Some properties offer higher yields than housing, such as commercial premises (7.2%) and offices (6.7%), according to idealista.com. Garages yield 4.5%.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Now Is The Time To Invest In Housing

11 May 2015 – Expansión

The real estate sector is taking off / The real estate sector is becoming more attractive for investment purposes. Now is the time to buy, above all in the exclusive neighbourhoods of the large cities and in certain areas along the coast. Renting generates good returns.

Real estate investment is gaining lustre. Increasingly, experts are saying that the market has bottomed out and now is the time to buy.

House prices, which fell by 50% on average from (the heights of) the property boom, are experiencing a clear process of stabilisation and are now showing signs of gains in some places. The valuation company Tinsa highlights that Barcelona, Palma de Mallorca, Málaga and Burgos are the cities that experienced the highest inter-annual price increases during the first quarter, of between 0.1% and 5.4%. On average, prices rose by 3.3% during the first quarter, according to Sociedad de Tasación, reflecting even more optimistic data.

But beware, the experts warn that although investment opportunities exist, not all investments are good – many homes are still valued above market price. Nevertheless, in the most sought after areas, waiting to buy could be a mistake, since homes will be more expensive and there will be more people interested in making bids for them.

Location is key. The most profitable areas to invest in are the best areas of the large cities, especially Madrid and Barcelona, as well as the most established coastal enclaves, such as the Costa del Sol. For example, the gross annual return on a 100m2 home in a prime area of Madrid is around 5.2%.

The banks have more than 150,000 properties to sell through their websites. The discounts (they are offering) are less aggressive than during the peak of the crisis and there is an extensive supply of holiday homes. The most pronounced reductions are located outside of the premium areas, but homes in those regions are more difficult to monetise.

Rental returns

One of the most recommended strategies at the moment is ‘buy to let’. According to the President of the Foundation for Real Estate Studies, Julio Gil, “buy to let is currently one of the best alternatives for small investors in terms of return and risk”. You can obtain an average return of 4.7%. In the case of retail premises, the return that you can obtain increases to 7%; for offices, it amounts to 6.4%; and for parking spaces, it averages 4.6%, according to a report from Idealista.

These returns are significantly higher than the 1.6% offered by a 10-year Spanish treasury bond. Meanwhile, according to the Bank of Spain, average returns on 12-month deposits are below 0.5%.

One of the elements that reflects the reactivation of the real estate market is mortgage lending. It increased by 1.6% in 2014 to reach 203,000 loans, whereby turning the tables on seven years of decline. The improvement was even more dramatic in February, with an increase of 29.2%. Nevertheless, the figure still falls well below the equilibrium point, which is 450,000 (mortgages) per year, according to Sociedad de Tasación.

The financial institutions are optimistic and say that new credit will increase this year. Analysts at Moody’s ratings agency agree. They consider that the increase in mortgage lending will improve demand in the real estate sector, which in turn may help to increase property prices.

The financial institutions have already launched (campaigns) to secure clients and obtain customer loyalty during this period of recovery. Most of the offers from the banks are variable rate products (mortgages). The best deals have spreads of between 1% and 1.75%. However, it is important not to focus on the differential alone, since in some cases opening and cancelation fees apply, whereas in other cases they do not. Moreover, each entity usually requires a minimum income, which varies from one to another (from between €500 to €5,000 per month). Furthermore, in almost all cases, the banks require borrowers to purchase other products such as insurance and pension plans or (to commit to a minimum) credit card spend. Meanwhile, interest rates on fixed rate mortgages vary from between 2.4% to 5.5%.

Original story: Expansión (by C. Rosique)

Translation: Carmel Drake

New Investment Formula: Buy-To-Let Cooperatives

5 March 2015 – Expansión

Investing in the Spanish real estate sector has been not only an option, but almost an obligation for large investors in recent years, both Spanish and international. But, what about small savers? Do they have any options left to fall back on?

Away from the real estate companies that are listed on the stock market, there is an investment proposal that involves buying homes to let them out. Nevertheless, this model has not been operated on a professional basis in the past. Now, the Spanish company Alquiler Seguro, which specialises in the management of rental contracts for both tenants and landlords, has decided to launch a cooperative project involving homes intended for rental, which are designed precisely for that purpose from the outset. “Last year, we realised that our most frequent transactions involved clients who were owners of some properties and at the same time, tenants of others”, explains Gustavo Rossi, Chairman of Alquiler Seguro. “A change is happening in the market, whereby young people, who are accessing housing through the rental market, are becoming good savers whilst also being tenants”, adds Antonio Carroza, CEO of the company.

The executives of Alquiler Seguro propose that these tenants use their savings to purchase homes, for an average price of €120,000, which offer investment returns after 18-24 months (the time taken to construct the properties). “These are homes that are designed to be rented out; they are expected to generate returns of between 3.5% and 6% and achieve an investment return within ten years”, says Carroza.

Currently, the company has two developments underway, both located in Madrid, in the neighbourhoods of Carabanchel and López de Hoyos. “We have chosen areas where there is demand from tenants and prices (of the properties) are affordable”.

Both developments offer financial support. “Our model is 50% equity and 50% bank financing. Entities are willing to subsidise some of the land purchase since the properties have (already) been sold to the cooperative members”.

“In the case of these two projects, each investor has acquired one home, but the goal is to move towards a model that does not involve horizontal divisions, but rather one in which many investors buy the whole development. We already have several plots of land in our portfolio that we intend to develop in this way”, says Rossi.

It is not the only buy-to-let investment project that the company is working on. “We are also evaluating the possibility of creating a Socimi, where investors contribute assets instead of capital but, at the moment, that is not a profitable model, due to the expenses associated with municipal gains”.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Housing: Rental Yields Now Exceed 5%

3 February 2015 – El País

Property has become a safe haven again for savers and retirees.

Rental properties offer returns of between 5% and 7%. After almost seven years of falling prices, credit constraints and low yields on bank deposits, property “has become a safe haven again for savers and retirees” said Jesús Duque, Vice-President of Alfa Inmobiliaria.

Buy-to-lets have become a good investment option once more, as they provide much higher returns than those offered by financial institutions. Furthermore, prices continue to fall, although that trend is now slowing. The price of second-hand homes in Spain decreased by 0.1% during the month of January to reach €1,592 per square metre, according to the latest real estate price index published by Idealista. The year-on-year decrease was 5.1%. Nevertheless, the outlook is set to change as prices in five autonomous regions (Murcia, Valencia, Cataluña, Madrid and the Balearic Islands) increased.

To generate income, one cannot buy just any house. When looking to invest, one should focus on homes that have permanent demand, i.e. those with a central location. The most stable investments are properties located in middle class neighbourhoods, since they have risk-reward relationships that offer more stability over the long-term.

“It is much more worthwhile to invest in a neighbourhood in any city, rather than in a house on the beach, where the possibility of renting is usually limited to the summer months”, explains Duque. The greater the rate of rotation, the lower the profit. Several months may pass between tenants during which time the owner receives no income and also has to upgrade and repair the property. “Whenever possible, if you are looking for a stable investment, you should try to rent out your property for long periods”, said the expert.

Family homes amd those with space for at least two adults are better than one-person studios, for one-income households. And, almost more importantly, you must ensure that the rent will be collected and that it will cover the investment. This can be done through an objective analysis of the tenant’s ability to pay, but can also be supplemented by non-payment protection insurance, which although decreases the profitability of the operation, does provide security.

One should keep in mind that from the expected yield of 5% to 7%, an owner should deduct 1% to cover the payment of IBI, community costs, garbage collection, insurance and the repair and maintenance of the property.

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake