The most profitable cities, districts, and neighborhoods
Housing in Spain has often been a main investment attraction. Investors buy homes for themselves or to rent out and make a bit of money. The housing market in Spain is growing. so many wonder if it’s the right time to invest. Another important question is where to buy rental real estate that’ll make good returns.
The profitability of rental housing in Spain in the third quarter of 2021 was 6.4%. This is 1.2% more than 5 years ago. his was 5.2% In 2016 and 4.3% in 2011 (2.2% lower than a decade after).
We can see that income from rent is growing constantly in the Spanish housing market even though the pandemic interrupted this for some time. Data shows that rental apartments and houses in September 2021 were 0.6 points less profitable than September 2020 (7%). But, the benefits of buying a home to rent out are still higher than in 2019, as well as 5 and 10 years ago.
"Real estate investments have become a ‘safe haven’ amid all the uncertainty caused by the pandemic. Many private investors have invested in this market because they consider it stable and recovering from the crisis," Spanish real estate experts explain.
Provincial capitals with the highest returns
According to Spanish analysts, the rental profitability in Spain fell by 8.3% in the second quarter of 2021 compared to Jan-April with 7.01%. The pandemic dropped rental prices but housing prices continued to rise.
Gross rental yield is equal to the highest annual rental income and property price. This does not include maintenance costs and months of possibly not having tenants.
The most profitable capital is Lleida in Catalonia with a gross margin of 7.93%. It’s the highest in Spain in the second quarter. Huelva (7.54%), Murcia (7.47%), Ceuta (7.23%), and Zamora (7.08%) have gross margins above the average 7%..
The gross yield exceeds almost half of the provincial capitals of Spain at 6%. This includes Segovia (6.95%), Santa Cruz de Tenerife (6.89%), Castellon de la Plana (6.84%), Almeria (6.78%), Tarragona (6.69%), and Soria (6.68%), as well as other cities with lower yields like Toledo, Lugo, Cuenca, Oviedo, and Caceres.
In Ceuta, Zamora, Lugo, Cuenca, and Melilla, the profitability growth in the second quarter was almost 10% compared to Jan-April. But other regions decreased - Teruel had the highest drop of 10%, San Sebastian – 4.13%, and Cordoba – 3.03%.
Cities with the lowest income
The capitals with the lowest returns are San Sebastian (3.37%), Palma (4.40%), and Coruna (4.70%). Madrid and Barcelona are also low but slightly higher at 4.87% in Madrid and 4.76% in Barcelona. Analysts say that the pandemic affected these cities the most. The rental, sales and purchase markets in both capitals stopped developing before the pandemic lowered rent and raised housing prices.
Profitability of provincial capitals
These are the average annual profitability in all provincial capitals:
Lleida 7.93%
Huelva 7,54%
Murcia 7.47%
Ceuta 7,23%
Zamora 7,08%
Segovia 6.95%
Santa Cruz de Tenerife 6.89%
Castellon de la Plana 6.84%
Almeria 6.78%
Tarragona 6.69%
Series 6.68%
Toledo 6.65%
Lugo 6.64%
Cuenca 6.63%
Oviedo 6.51%
Caceres 6,41%
Jaen 6,39%
Salamanca 6,29%
Palencia 6,28%
Melilla 6,27%
Avila 6,27%
Cordova 6,26%
Palmas de Gran Canaria 6,24%
Burgos 6,19%
Huesca 6,14%
Guadalajara 6,13%
Leon 6,12%
Albacete 6.10%
Alicante 6.04%
Zaragoza 6,01%
Valencia 6%
Ciudad Real 5,97%
Sevilla 5.89%
Badajoz 5.87%
Valladolid 5.82%
Grenada 5.81%
Ourense 5.70%
Malaga 5,57%
Santander 5.56%
Pontevedra 5.55%
Teruel 5,50%
Cadiz 5,42%
Girona 5,40%
Victoria 5,13%
Madrid 4.87%
Bilbao 4.77%
Barcelona 4.76%
Pamplona 4.73%
La Coruna 4.70%
Palm tree 4.40%
San Sebastian 3.37%
In early 2022, Spanish real estate analysts reported that rental and sales were stable, and the time frame to sell a property or find tenants was shortened. But you must still check the returns in each area or city as they can differ.
Experts say that it’s a great time to invest in real estate, especially in the elite sector. Let's take a closer look at this.
Luxury housing is popular: where should you buy?
More people are interested in luxury housing in Spain. The pandemic stopped real estate purchases because showing properties couldn’t happen. This dropped the market including elite houses and apartments. But the prices didn’t change too much. Experts say this didn’t drop below 10% and by mid-2021, prices recovered like in Madrid.
Foreign investors returned after more vaccinations and fewer restrictions. Experts expect the market to recover soon, so prices will rise by at least 3%. Forecasts say that the average price of 1 square meter of luxury housing in the secondary market will reach 6,700 € and 9,300 € for new buildings.
Next, we’ll suggest where it’s best to invest in luxury housing.
The best luxury housing investment options
Several areas in Spain are best suited for this. Madrid is the capital and far ahead of not only the rest of the cities in the country but also the world.
Barcelona is second on this list. Experts recommend paying attention next to San Sebastian, which is best for long-term investments.
Valencia and Malaga are great options. Malaga has been changing over the years, attracting attention which affects housing costs.
Is it a good time to invest in Spanish housing?
Many analysts believe that the real estate market is an exceptional investment opportunity now. Some reasons are that international investors and tenants are returning to the country because of fewer restrictions. Second, more young people want independence and to leave their parents’ homes (because of lockdown). Third, interest rates on loans are low.
Real estate is the most stable part of the economy in an ever-changing market. And luxury real estate is the fastest-recovering even in times of crisis.
If you’re deciding between Madrid and Barcelona to invest in luxury real estate, experts believe that it’s best to diversify your investments.
How will the real estate market develop in 2022?
Forecasts for the 2022 Spanish real estate market are very optimistic. The 2 main reasons are the economy’s support by European funds, and 2022 is not an election year. This means that anything is possible for the country’s future development.
The pandemic showed us that nothing is certain. But we can be certain that the positive results of 2021 overall tell us that the Spanish housing market will probably be successful in 2022.