ST: Rental Yields Soar in Sevilla, Valencia & Tenerife in Q1

2 April 2018 – Expansión

The three cities recorded increases of more than 16% during the first quarter, whilst the national average improved by 7.6%. Barcelona offers returns of 8.7% and Madrid 7.5%.

Buying a home to let it out has become one of the most attractive investment options of recent times. The returns offered by renting a home, in an environment of low interest rates and moderate inflation, are greater than other options, such as those generated by debt and deposits. In this way, during the first quarter of 2018, the average rental yield in Spain amounted to 8.2%, according to the Real Estate Sector Trends Report for 2018, compiled by Sociedad de Tasación. Although Barcelona is the province that offers the highest return (8.7%), the overheating of prices there is reducing margins, making it a safer location but with less potential. In that context, Sevilla, Valencia and Sant Cruz de Tenerife are emerging as interesting targets.

The evolution of residential yields in Spain, which soared by 7.6% during the first quarter of this year, suggests a sustained trend over the coming months, favoured by an increase in demand, the strong performance of the economy and the growth in house prices, which rose by 4.3% in April.

The increase in prices is still more pronounced in Spain’s provincial capitals. In Barcelona, for example, prices rose by 10.2% in 2017. In that province, rental housing generated a return of 8.1%, representing an asset with “very limited risk”, according to analysis from Sociedad de Tasación. It was followed by Lérida, also in Cataluña, where rental housing offered a return of 8.45%.

Although prices are high in Barcelona, they have not had an impact on rental yields, something that has happened in other areas, such as the Balearic Islands. The return offered by a rental home in the islands fell by 3.2% during the first quarter. That reduction could be due to the increase in house prices in recent years due to the tourist rental boom, which has reduced the scope for further increases. In Palma de Mallorca, for example, the number of beds from unregulated tourist rental platforms now exceeds the supply of hotel beds by 100%, according to data from Exceltur, which may, in turn, have an impact on prices. In fact, the Balearic Islands is the autonomous region where the most effort is required to buy a home in all of Spain.

An average citizen would need to allocate his entire salary for 14.9 years to be able to buy an average home in the Balearic Islands, twice the national average (7.5 years). That conclusion can be deduced from Sociedad de Tasación’s real estate effort index, which shows that, despite the increase in incomes, buying a home in many cities in Spain is still prohibitive for many.

In this context, markets such as the one in Valencia are interesting. Not only is it the province with the third highest rental yield (8.11%) in the country, it also ranks highly, in second place, in the increases in returns: an increase of 16.7% that more than doubles the evolution of the most profitable province, Barcelona, which saw its yields rise by 5.2% during the first quarter.

In terms of Madrid, although the average rental home in the province offers a yield of 7.46%, which is below the Spanish average, that is due to the differences between the rental market in the capital and other cities in the province.

Sevilla is the province that leads the yield increases. During the first quarter, yields there soared by 17.7%, well above the rises in Madrid (6.2%). In third place was Santa Cruz de Tenerife, where letting a home is now 16.2% more lucrative than it was a year ago.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Servihabitat: Rental Yields Now Exceed 10% in Madrid, Cataluña, Balearic & Canary Islands

18 December 2017 – Expansión

“The Spanish residential market has been showing clear signs of recovery in 2017 and all indications are that the rate of growth will be even higher in 2018. The number of house sales will rise by 16.9% this year, to exceed 472,000 operations, and by another 18.3% next year, which means that we will see the sale of almost 560,000 units”. In this way, Servihabitat summarises the trend in the residential sector, which is enjoying a sweet moment.

The key factors contributing to the boost in demand include: the growth of the number of solvent buyers; policies by financial institutions to grant more loans; the progress in terms of the construction of new homes; and the increase in investor interest – in the case of holiday homes, investors now account for 19% of all operations.

This last aspect is fundamental for understanding the boom in the most consolidated areas of Spain. According to data from Servihabitat, the average annual yield from buying a home to let is 10%: 5.5% from the gross rental yield and 4.5% from the appreciation in the property value over 12 months, which the real estate servicer calculates in its forecasts at the end of 2017.

This data tallies with the 9.8% calculated by the Bank of Spain. The difference is that Servihabitat breaks down the yield by region and province. The regions in which it is more profitable to acquire a home to let are: the Community of Madrid, (13.3% gross p.a.), Cataluña (13.1%), the Balearic Islands (11.4%) and the Canary Islands (10.8%).

They are the only four regions where yields exceed the national average, which gives us an idea of the importance that the two largest cities and residential investment along the coast play in the overall calculation for the Spanish market. It comes as no surprise that the most profitable provinces are: Barcelona (13.7%), Madrid (13.3%), Las Palmas (12.4%), the Balearic Islands (11.4%), Málaga (10.1%) and Santa Cruz de Tenerife (9.5%). In other words, the six largest real estate markets in Spain (together with Alicante), where demand from overseas buyers is boosting the sector and the cranes are back on the horizon. Overseas buyers now account for 17.4% of all purchases or one in six. That percentage rises to 47.6% in the case of Alicante, 40.8% in Santa Cruz de Tenerife, 33.7% in the Balearic Islands, 32.8% in Girona, 31.4% in Málaga and 22.6% in Las Palmas.

They are clearly the “hot” areas of the real estate sector, but they are not the only ones to be offering high returns. Other examples include: Salamanca (8.4%), Guadalajara (7.8%), Murcia (7.7%), Cantabria (7.6%), Valladolid (7.5%) and Lleida (7.5%), amongst others. This positive trend will become even more marked in 2018 (…).

In the Catalan capital, yields in the district of Sants-Montjuic are off the scale, with an average gross annual return of no less than 32.9% (5.3% from the rental yield and 27.6% from an appreciation in property prices). It is followed by Eixample (26.8%), Gràcia (25.9%), Sant Martí (25.6%), Horta-Guinardó (24.9%) and Nou Barris (21%). The centre (Ciutat Vella) yields 19%, and the exclusive district of Sarrià-Sant Gervasi 13.2%

In Madrid, yields in the Centre amount to almost 20% (19.7%), followed by Salamanca (19.2%) and Chamberí (18.8%) (…).

Despite this inflation in prices and yields, “there is no risk of a bubble in either city”, according to Cabanillas. “The problem is not speculative; the price rises are resulting from the pressure in terms of demand for the use of second homes and tourist accommodation. The risk is that gentrification will force young people out of city centres, but there is no risk of over-financing”, says the CEO of Servihabitat.

Original story: Expansión (by Juanma Lamet)

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

CBRE: Investment In Logistics Sector Equals €205M In YTD15

5 June 2015 – ABC

The industrial and logistics sector recorded an investment volume of €205 million during the 5 months to June, i.e. double the amount recorded during the same period last year, as a result of eight transactions, according to data from the real estate consultancy, CBRE.

One of the most important transactions was Rockspring’s purchase of two logistics warehouses under construction in Torrejón de Ardoz from Montepino, with a surface area of 49,000 m2, which will be completed during the first quarter of 2016.

The increase in purchase activity has resulted in a rapid compression of prime rents, which now stand at around 7%, down from 8.50%-8.75% in 2013.

Last year, the hiring of logistics space in Madrid reached almost 400,000 m2, the highest figure seen in the last 4 years; whilst in Barcelona, more than 200,000 m2 was hired during the first quarter of 2015, showing a strong performance even during the worst years of the recent crisis.

In this sense, CBRE believes that rentals in Barcelona during the first half of 2015 may equal the figure recorded for the whole of last year.

The Corredor del Henares continues to be the favourite area for logistics companies in Madrid; whilst in Barcelona, demand is still primarily distributed between the “segunda corona” or ‘suburbs’ (Vallés Oriental y Occidental) and the “tercera corona” or ‘greater metropolitan area’ (the provinces of Gerona and Tarragona).

CBRE expects the buy-side pressure to continue, with the entry of a greater number of players, all in an environment characterised by greater ease of access to financing.

Original story: ABC

Translation: Carmel Drake

Tecnocasa: Average Rents Reached €8.54/sqm In 2014

19 February 2015 – El Mundo

Rental prices (in 2014) were slightly higher (+0.47%) than at the end of 2013.

The market is suffering its greatest declines in Madrid (-1.57%) and Barcelona (-0.59%).

The typical landlord profile: pensioners (28%), Spanish nationals (96%) and married (70%).

The typical tenant profile: single people, with permanent employment contracts, aged between 25 and 44 years old and Spanish.

The Tecnocasa Group has presented its first report about the residential rental market in Spain (a groundbreaking study). Highlights show that the average cost of rental homes amounted to €8.54/square metre (in 2014), which is slightly higher (+0.47%) than at the end of 2013.

With these figures on the table, Tecnocasa says that “rental prices have remained stable (upwards)”, although it acknowledges that there has been a slight decline in the two largest Spanish cities. Specifically, rents became 1.57% cheaper in Madrid and 0.59% cheaper in Barcelona, where prices amount to €10/sqm in absolute terms.

One must go back to 2007 to find the last report about rental prices nationwide. The then Housing Minister, María Antonio Trujillo, presented the OEVA (the State Observatory for Rental Housing or ‘Observatorio Estatal de la Vivienda en Alquiler’), which was the first official survey about the market. It was also the last. That study reported that the average price of rental housing was €7.20/square metre.

Tecnocasa’s study shows that the profile of landlords, i.e. of the people that lease out their properties, includes a high percentage of pensioners (28%), Spanish nationals (96%) and married people (70%). In terms of the profile of tenants, they are single, with permanent employment contracts, aged between 25 and 44 and, for the most part, are Spanish.

Lázaro Cubero, Director of the Department for Analysis and Reports (Departamento de Análisis e Informes or DAI) at the Tecnocasa Group, notes that rental prices have decreased by less than purchase prices in the last year, which means that “the yield a landlord can obtain by renting out a home that he/she owns is now greater”. Specifically, this yield has increased to 7.41% on average for the whole of Spain.

These figures represent the findings of the first report about the rental market conducted by the Tecnocasa Group and the Univerisdad Pompeu Fabra (UPF), based on a study that analyses data extracted from the property rental agreements brokered by Tecnocasa’s network (of agents) in Spain between 2012 and 2014.

Original story: El Mundo

Translation: Carmel Drake