Bank Of Spain: Average Housing Yield Amounts To 8.8%

30 April 2017 – Expansión

Housing is still one of the most profitable investments. The net return from buying a home to put it on the market to rent, now amounts to 8.8% on average. That is according to data from the Bank of Spain, which takes into account not only income from the rental of properties, but also the annual appreciation in their values. In other words, if the rental of a home generates an income of 4.4% and the price rises by 5% in twelve months, then its total return would be 9.4%. And that represents an attractive yield, well above the rates being offered on debt and deposits. Moreover, in some places, the real estate market is offering even higher returns.

To this end, Expansión has identified the districts in Spain’s five largest cities where investors can earn more than 10% from buying a home. And the conclusions are clear: 9 out of the 10 districts in Barcelona and 12 of the 21 districts in Madrid already exceed that percentage. In Valencia, 10 of its 19 districts generate returns of more than 10%; in Sevilla, only 1 out of 11; and in Zaragoza, 4 out of 12.

The most profitable districts are concentrated in the Catalan capital, above all due to the very high appreciation in property values there. Ciutat Vella leads the ranking with 27.7%, followed by Eixample (22%) and Horta-Guinardó (20.5%). That same percentage is also being generated in the Madrilenian district of Hortaleza (20.5%), which is not one of the most selective neighbourhoods, but, prices are rising quickly there nevertheless. It is followed by the Centro district of the Spanish capital (19.8%). Following those five, the ranking continues with Rascanya (Valencia) and Tetuán (Madrid), both with a gross annual return of 18.9%.

In the most exclusive neighbourhood of Madrid (the district of Salamanca) the figure is 13.9%. In Sarrià-Sant Gervasi (Barcelona), the average return is 9.8%. Other prime locations such as Chamartín (14.6%) and Gràcia (17.9%) are also very attractive. (…).

“The increase in returns in the city centres is happening due to a cocktail of senior boomers (the generation born in the 1960s) returning to the city centre and the huge boom in tourist rental properties”, said José Antonio Pérez, Director at the Real Estate Practice of the ‘Instituto de Práctica Empresarial’. That means that “now is a good time to buy a small flat or a small building to turn it into apartments for tourists”, said Pérez. (…).

But, investors should not limit themselves only to the large cities to find attractive investments. “Savers should also buy tourist homes in areas along the coast where there is already a lot of demand, or in peripheral areas of large cities that are well connected or in university areas”, advised Pérez.

The recovery in the residential sector is spreading out across the whole country. Slowly and unevenly, but it is happening. (…).

According to Jorge Ripoll, Director of Research at Tinsa, “The best prospects for investment in housing are located in established areas with active markets that are clearly recovering, such as those in Barcelona, Madrid, Málaga, Valencia, San Sebastián and Bilbao, for example”. They are areas “where asset prices are rising and where there is solvent demand for primary residences from those who cannot afford to buy a home due to their inability to have been able to save in the past”, he said.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Barcelona, Madrid & Costa Del Sol Lead Residential Recovery

26 October 2015 – Expansión

Two terms are key in the residential market: “trend” and “it depends”. The first has a clear rationale: investment in housing is a long-term phenomenon and as such analysis should be kept as far away from the short-term as possible. The second serves as a wildcard, in one of the most fragmented markets of all. For example: Is now a good time to invest in a home? Well, “it depends” on where, because the real estate recovery is happening at, at least, two speeds.

On the one hand, we have medium-sized cities with a lot of stock and less established areas, which are weighing down on the results. On the other hand, we have the large real estate centres and main tourist destinations, which are experiencing a resurgence.

According to a survey conducted by the Network for Qualified Property Consultants (RAIC or ‘la Red de Asesores Inmobiliarios Cualificados’) for Expansión, 73.9% of the professionals in the sector think that the three main leaders of the real estate recovery will be Madrid, Barcelona and the coastal regions.

17.39% believe that the leaders of the real estate recovery will be Barcelona and Madrid only, whilst 4.35% put thier money on the cities in the north of Spain. A similar percentage back the Mediterranean Coast.

Madrid and, above all, Barcelona, are experiencing a new period of real estate expansion. House prices increased by 7.4% in Barcelona during Q3 2015 and by 0.2% in the capital, according to Tinsa.

The third most preferred region for investment, since it is recovering so well, is the Costa del Sol, which, unsurprisingly, is regarded as the “leading indicator” of the sector. When prices rise in Marbella and the surrounding area, prices in other areas tend to follow suit.

Javier García-Mateo, Partner in the Financial Advsiory team at Deloitte explains: “Crises always start on the coast, but so too do the recoveries, above all on the Costa del Sol. It was in Marbella that we first began to see price decreases in 2007”. He considers that now is a “good time” to buy on the coast of Malaga. “And the feeling there is even better than in many of the major cities. The coast is a much more volatile market, where the decreases are very acute, but so too are the increases. And demand there is European, not just Spanish”.

Foreigners are the main players. José Antonio Pérez, Professor of Real Estate at IPE, says that purchases by foreigners “are growing twice as quickly as those made by Spaniards, on the coast”. “For the most recent developments sold off-plan in the Costa del Sol and Levante, more than two thirds have been bought by citizens with 12 different nationalities; they demand and pay more, and almost always pay in cash”, added Pérez.

The coast in Alicante is starting to recover strongly too, according to Jorge Ripoll, Head of Research at Tinsa, the largest appraisal company in Spain.

The consultant José Luis Ruiz Bartolomé emphasises another major focus of the residential growth: the metropolitan areas of the large cities. “Opportunities in the labour market are clearly found in Madrid, Barcelona, Valencia and other large cities, and that is leading to migration, particularly young people, to the peripheries of these cities”, he says. “That is where homes need to be built”, he adds.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake