Is Investing in Spain’s Real Estate During this Period of Uncertainty Worthwhile?

Is Investing in Spain’s Real Estate During this Period of Uncertainty Worthwhile?

Spain is a dynamically developing country. It is popular among foreign investors due to its excellent climate and a large selection of real estate for investment on any budget. Just as in previous years, in 2022, Spanish real estate is in high demand among foreign nationals. Let us discuss which regions of Spain are most profitable to purchase a property in.

Content:

Housing in Spain – investment and capital preservation

Houses and apartments in Spain remain one of the most reliable ways to save and grow capital in this country. The crisis caused by the global pandemic in 2020 affected real estate sales. However, after the restrictions were lifted in 2021, the market began to grow again. By 2022, the market situation stabilized, and there is now a positive upward trend in housing sales.

According to local real estate analysts, foreigners were frequent buyers of Spanish housing in 2021. Generally, foreign buyers purchase more expensive housing than residents who choose premium real estate. Based on current sales figures, as a result of increased demand, experts predict an average increase in the price of 2-6% per square meter in some regions of the country by the end of the year.

Why is this happening? The fact is that investing in Spanish real estate in 2022 is the most profitable investment not only in terms of reliability but also in terms of profitability. Taking into account the annual increase in housing prices, the profit is from 5 to 7% per annum, while the income from a bank deposit, adjusted for inflation, may be lower than 1-2%. The stock market situation is no better.

Is Investing in Spain’s Real Estate During this Period of Uncertainty Worthwhile?

The best property in Spain for investment in 2022

Many overseas buyers purchase housing abroad to generate passive income by renting out their property. In Spain, it is more beneficial to rent housing for a long period. This is especially true in megacities, where there is always a high demand for long-term rental housing.

Long-term lease

For homeowners with a Spanish residence permit, there are some preferential conditions when renting out their housing. For example, the tax on the income of a rental business for Spanish residents is 60% less than that for foreign citizens without a residence permit.

Studio apartments are in great demand in Spain, but such housing is rented for a short time, and tenants in these apartments change more often.

It is most advantageous to rent apartments with 2 or 3 bedrooms. These apartments are perfect for couples with children who prefer long-term rentals, which frees the landlord from the hassle of searching for new tenants.

Apartments with 4 bedrooms or more are also in great demand, but in Spain, such housing is rented by visiting students who prefer to live together and share the rent. As statistics show, landlords are not always satisfied with such tenants, because they change frequently, and the level of reliability is low.

New buildings

It is important to note that apartments in new buildings in Spain bring more income from rentals than apartments in older buildings. Most tenants prefer comforts and well-developed infrastructures nearby, such as transport interchanges, shops, medical and educational institutions, and public transport. Parking and children’s playgrounds, security, and video surveillance inside the residential complex are highly valued by tenants who are willing to pay more for renting an apartment if they have all the benefits they require.

Land purchase

In 2022, wealthy and experienced investors are buying land plots to build new residential complexes and then rent them out, with the possibility of inviting other investors to purchase the properties during or after construction. This type of investment requires significant initial capital.

Residences for the elderly

In Spain, there are many special residential complexes with specific conditions for the elderly. In addition to all the advantages of a modern residential complex, medical staff offer services here, apartments are equipped with emergency call buttons, and rooms are equipped for medical procedures to preserve health. According to statistics, the wealthy elderly prefer this type of housing.

Purchase for resale

With an annual increase in prices, the buyer can earn up to 20% of the original value of their real estate for resale. This applies to both new buildings and secondary market real estate. In the first case, it is worth considering that the cost of housing in new off-plan buildings in Spain is always lower. The owner can be certain of the profitability of the sale of his apartment to the new owner after the property’s commissioning. Regarding the real estate of the secondary market, it is necessary to take into account the following: to receive income from the resale of housing, the owner is responsible for the costs of improving and repairing apartments. A small cosmetic repair will increase the market value of the property.

Buying an apartment or a house for resale is ideal for investors hoping to make a profit within a short period.

The most investment-attractive regions of Spain

Real estate in large megacities such as Madrid and Barcelona is the most reliable for investors. The demand for housing in these cities is always high both in new buildings and in the secondary market. In 2021, Numancia became the most profitable place in Madrid, with an income of 7.6% per year. In Barcelona, the most profitable areas are Provençals del Poblenou and El Raval, with a yield of 5.7% per year.

However, these areas are not the most cost-effective in the country. Carolinas Bajas in Alicante (8%) and Pla de Bon Repós (7.8%) have the highest rental yields. This is followed by Valencian Rascanya (8.3%) and L'olivereta (8.1%). Almanjáyar, Granada (7.9%) completes the top 5.

According to Spanish real estate analysts, the average regional profitability for mid-2022 is as follows: The return on investment is highest in Murcia (7.5%), Navarre, and Valencia (7.3%). Catalonia (6.6%), the capital of which is Barcelona, ranks third in the rating.

Real estate in regions such as Andalusia, La Rioja, Castilla y Leon, Cantabria, Asturias, Castilla La Mancha, Aragon, and the Canary Islands, generates an income of 6-6.6% per annum. In general, you can expect a yield of 6.5% from renting out real estate in resort areas.

Is Investing in Spain’s Real Estate During this Period of Uncertainty Worthwhile?

Considering the threat of a "bubble" in the Spanish real estate sector

Due to record figures and sharply increased activity in 2021, there was talk among investors about a so-called "bubble", which relates to the market being too “overheated” and, the possibility of this resulting in a collapse ("the bubble bursting").

The situation of rising prices is a repeat of the 2008 boom, which ended with the "bubble" bursting. However, some factors suggest that there will be no collapse. Unlike the previous situation, the market growth in 2022 is driven by delayed demand and objective macroeconomic factors. We should not lose sight of the aggravation of relations between Russia and Ukraine, as a result of which investors are considering countries that are as far away from the scene of hostilities as possible.

In contrast to the previous crisis, the market is not overflowing with offers, and the discrepancy between a few offers and increased demand can strengthen the growth effect.

According to the Bank of Spain, the cost of housing is now higher than that of pre-pandemic 2019, but the balance remains and there are no signs of “overheating”.

Conclusion

Spanish real estate is a reliable investment option in 2022. The convenient location of the country, a wide range of destinations, and high profitability are the main reasons why investors choose this country for investments.

Is Investing in Spain’s Real Estate During this Period of Uncertainty Worthwhile?

Assistance in choosing a property in Spain

If you are interested in buying your own house in Spain, for personal use or investment in this sunny country, you can make use of the Spain-Real.Estate site. Use the website to search for real estate or send a request with your requirements. Our staff will help you select the most interesting and profitable offers on the Spanish real estate market.

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