Alicante has been the object of special interest from real estate investors for a long time and, recently, has earned special popularity among small investors. So, in 2022, up to 32.3% of all real estate transactions in the city were carried out by means of this category of buyers. This indicator is 3.3 points more than the results of the whole of 2021, which accounted for a share of 29%.
The main earning strategy for such buyers is renting out the purchased objects. In this regard, Lazaro Cubero, Director of Market Analysis at Tecnocasa, noted that such indicators speak for themselves in the issue of profitability of deposits in the regional residential market.
Additionally, he pointed out that according to current indicators, when renting out a residential facility, an investor can receive a gross annual profit of 8.7%. The time it will take to pay back the investment, in the number of years, varies from the initial size of the invested funds and conditions, but on average it is about 12 years (138 months).
However, today the real estate rental market is going through rather uncertain times, including due to the abundance of investors in the market. Rental rates in Alicante have increased by 5% over the past year, which has increased the cost of renting a square meter to 6 euros. This puts the rental segment in serious competition with real estate sales.
So, a person with fairly modest savings will not lose more from a mortgage loan to buy a home, even under current conditions. For example, for an average residential property in Alicante worth up to 69,000 euros, a potential buyer can apply for a mortgage of up to 55,200 euros at an annual interest rate of 2.5% and a repayment period of 25 years. Thus, the monthly loan payment for such a buyer will be only 248 euros.
At the same time, the rental rate for such an object reaches 500 euros per month, which gives a difference of 252 euros in favor of a mortgage loan. This is indicated by data from the Tecnocasa study «Analysis of the residential real estate market in Alicante». The information for the study was obtained on the basis of the economic activities of 10 Tecnocasa franchise offices both with the real estate itself and within the framework of financial intermediation.
Prices and characteristics of real estate
According to Jose Angel Morcillo, regional manager and head of the Tecnocasa office in Alicante, secondary market housing prices in the city will grow by 4.5% in 2022, reaching 823 euros per square meter. At the same time, Morcillo emphasizes that 66.7% of residential properties in the city were sold at a price of up to 75,000 euros, sales of objects are more expensive than 75,000 euros (approx. up to 150,000 euros) accounted for the remaining 33.3% share. At the conclusion of transactions, the intensity of negotiations is actively increasing and the final sale price is usually 11% of the original price.
The average residential property for sale in Alicante, in 2022, has the following characteristics:
- Elevator — 58.5%;
- Area from 60 to 80 square meters — 40%;
- Three bedrooms — 63%;
- The average age of the building is from 40 to 60 years — 67.7%.
The profile of a modern buyer is the following set of characteristics:
- Purchases real estate for the first time — 66.2%;
- Pays in cash — 60%;
- Is aged from 45 to 54 years — 44.6%;
- Has Spanish citizenship — 61.5%;
- Has a permanent employment contract — 61%;
- Has a secondary education — 42.2%.
Up to 59% of new real estate buyers who resorted to mortgage lending when buying a home in 2022 did so through the opening of a loan with a fixed interest rate. This indicates a significant decrease in confidence in the stability of the market, as the volume of loans opened at a variable rate is growing. For comparison, in 2021, fixed-rate loans held a share of 92.6%.
Lazaro Cubero also gave a comment on housing prices in Alicante. According to him, at present, the level of housing prices in Alicante provides good opportunities for the purchase of real estate. However, the offer on the market is wide and diverse, so the best offers will require a fairly thorough search. Many owners also tend to overestimate the value of their offer, so you need to be ready for serious negotiations about the final price. According to some reports, up to 21% of sellers in the city overestimate the value of their real estate.