Idealista: Rental Prices Rose by 13.2% in Málaga in 2017

11 June 2018 – Diario Sur

Do you live in Málaga for less than €700/month? Then, hold on tight to your home as if it were a treasure. These days, people who are coming to the end of their rental contracts or who are experiencing life changes that are forcing them to find homes in the city – whether it be a move for work, a separation or an emancipation from the family home – are coming up against a harsh reality: the high cost of rent, which has gotten worse to the extent that, today, homes coming onto the market have an average monthly rent of more than €1,000 in half of the neighbourhoods in the provincial capital. That is according to statistics based on the active adverts on the real estate portfolio Idealista, which calculates that rental prices increased by 13.2% over the last year, one of the highest rises recorded in all of Spain’s large cities. Over the last five years, the cumulative increase amounts to 38% and the price per square metre now amounts to €9.80, the highest of all of the Andalucían capitals.

The sharp rise in prices is the consequence of a significant imbalance between supply – which has decreased by 36% in three years, judging by the adverts on Idealista – and demand for rentals, which has increased by more than 120% over the same period. “What is happening in Málaga is what happened previously in Madrid and Barcelona: a genuine shortage of rental housing, especially in the Centre and Teatinos districts, which are the most sought-after areas”, says Carlos Rueda, spokesman for Idealista in the south of Spain, who knows real estate agents in those neighbourhoods who have waiting lists with more than 100 people on them.

Since Málaga has come late to this trend, its prices are now rising rapidly, whilst prices in the country’s two largest capitals are starting to enter a stabilisation phase, according to the Head of Research at Pisos.com, Ferrán Font. “In Barcelona and Madrid, there are areas where prices have stopped rising because price increases cannot be infinite in the rental market”, he added.

But in Málaga, that ceiling has not yet been reached. Inmaculada Vegas, Partner of the real estate agency specialising in rentals Rentacasa, summarises the situation as follows: “The supply has decreased significantly; almost no homes come onto the market. And those that do come on are very expensive. Many owners can’t help themselves: they see that their neighbour has let his home for €800 and so they raise their asking price to €900…the problem is that they find people to pay those prices”, she explains.

The perception of rising prices is even greater in the case of rentals governed by the old Urban Leasing Law, which are being updated now after five years. They are contracts that were signed at the height of the crisis (2013) and now they are being renewed in a radically different scenario. “In those cases, prices may rise by €300 or €400 overnight”, explains Carlos Rueda (…).

For Vegas, much of the blame for what is happening lies with tourist rentals: “Over the last two years, we have seen continuously how long-term rentals are being taken off the long-term rental market to be let by the day or by the week, above all in the Centre, but increasingly in the east of the city as well”, she says.

Rueda does not agree that the influence of holiday rentals has been that great. In his opinion, “since the crisis, Málaga has seen a huge explosion in demand for rental properties, not only from those who cannot afford to buy but also from those who want to live in rental homes” (…).

Original story: Diario Sur (by Nuria Triguero)

Translation: Carmel Drake

Bank of Spain: Rental Yields Soar to 9.8%

7 December 2017 – Expansión

According to the Bank of Spain, buy-to-let homes yield a return from rental income of 4.2% p.a. If to that figure, we add the appreciation in value of the underlying property, the total return amounts to almost 10%, on average. That figure is similar to those recorded during the real estate boom.

Buying a home to put it up for rent offers a much higher return than those generated by other financial assets, such as debt and deposits. Moreover, house prices are still much lower than they were ten years ago and still have the potential to rise. These factors, combined with the gradual recovery in employment and the enormous demand for rental properties, have created a very fertile scenario for investors, both for individuals as well as for Socimis and funds. For this reason, the major indicator of the residential sector is no longer just price – although that is important – but instead yield.

Homes now generate an average annual return of 9.8%, according to the Bank of Spain, which takes into account not only the rental yield but also the appreciation in the property value over 12 months. In other words, the yield is now 1.6 percentage points higher than it was a year ago, to bring it in line with the figures seen at the end of 2007, at the peak of the real estate boom.

This rise in returns is due to the increase in house prices and the rental boom. Increasingly more buyers are opting to acquire homes as a business, in the hope that those properties appreciate in value and generate more than 4% in the rental market (the average is 4.2%).

According to the latest study from Fotocasa – which Expansión revealed last Saturday – 24% of the people who have participated in the residential property market in the last year are investors. That figure exceeds 30% in the large cities, above all in Valencia (44%), Barcelona (36%) and Madrid (35%), according to data from Tecnocasa and the Universitat Pompeu Fabra.

“Now is a good time to buy to let, both for the long-term as well as for second home properties, given that both formulae are generating returns that, in the current context of low interest rates, cannot be found in any financial products or on the stock market”, says Beatriz Toribio, Head of Research at Fotocasa (…).

What’s more, the appearance of new real estate business models has spurred profits along in the large cities, in such a way that 20% of investors now use their homes as tourist rental properties. That high percentage is due to the new short-term let platforms, such as Airbnb, which allow them to obtain even higher returns than from the traditional rental market.

Nevertheless, 65% of investors still prefer the stability of having a long-term tenant. The remaining 15% buy homes not to put them up for rent, but rather to wait for them to appreciate in value and to sell them at a profit.

Market leaders

Madrid and Barcelona are spearheading this new property fever. In the Spanish capital, buying a home to let it out generates a gross annual return of 11.8% (from rental income and capital gains); that figure amounts to no less than 23.1% in the Catalan capital, almost twice as much (…).

The central areas of Madrid and Barcelona are experiencing a genuine profitability boom. In the Catalan capital, the Sants-Montjuic district stands out, with a gross annual return of no less than 32.9% (5.3 points from rental income and 27.6 due to price rises). It is followed by Eixample (26.8%), Gràcia (25.9%), Sant Martí (25.6%), Horta-Guinardó (24.9%) and Nou Barris (21%, although the latter is the most profitable district excluding price rises: 6.6%), which all exceed 20%. The centre (Ciutat Vella) generates 19% and the exclusive district of Sarrià-Sant Gervasi yields 13.2%

In Madrid, the Centro district comes close to 20% (19.7%); it is followed by Salamanca (19.2%) and Chamberí (18.8%) (…).

Something similar is happening along the coast. The highest returns in the beach areas are located in the Balearic Islands, Barcelona, Las Palmas, Huelva and Almería, where rental yields exceed 5.5%, and overall yields exceed 10% if we include the capital gains. The high combined return along the Malaga coast (17.9%) is particularly noteworthy.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake