Return on investment remains profitable, although it has dropped to 7%

Return on investment remains profitable, although it has dropped to 7%

The gross margin on buying a house to rent it out has dropped to 7% over the past year. In the third quarter of 2020, the proposed rate of return was 7.9%. According to an analysis by Idealista, the leading real estate specialist in Southern Europe, the profit made even, in this case, is 15 times higher than the rates offered by 10-year government bonds (0.4%).

According to this study, which correlates the value of sales and leases of various properties to calculate their gross profitability, office space remains the most profitable real estate investment. The acquisition of an office in Spain for its subsequent lease implies a gross return of 11.4%, up from 11.2% a year ago. Housing returns are 9.4% (9.3% a year ago) and garage 6.3%, up from 8.4% in September 2020.

Housing profitability

Among the cities in Spain, Murcia is the most profitable - 8.3%. Lleida is in the second place (7.9%), followed by Huelva (7.4%), Santa Cruz de Tenerife (6.9%) and Almeria (6.8%). The lowest profitability in Spain is received by owners of rental real estate in San Sebastian (3.6%), Palma (4.4%), A Coruña (4.5%) and Barcelona (4.5%). In Madrid, the gross margin is 4.8%.

Profitability of a commercial fund

Commercial real estate is the product with the highest yield in almost all capitals. The highest income was received in Lugo (13.3%). Revenues follow it in Huelva (10.7%), Avila (10.3%), Oviedo (10.3%), Tarragona (10%), Zaragoza, Burgos and Huesca (9.9% in all three cases). In Barcelona and Madrid, this figure is 8.3% and 7.9%, respectively.

A Coruña and Albacete are the cities with the lowest return on-premises (7% in both markets), followed by Teruel (7.1%), Jaén (7.4%), Palencia and Segovia (7.8% in both markets cases).

Profitability of office space

Seville’s offices have the highest rate of return among cities, with a rate of 14.1%. It is followed by Toledo (10.1%), Huelva (8.9%), Zaragoza (8.4%) and Almeria (8.2%). In Madrid, profitability drops to 7% and in Barcelona to 6.2%. Below are the figures for regions such as A Coruña (5.8%), Bilbao and Valencia (6.1% in both cases).

Profitability of garages

Garages remain the least profitable property for investors in many regions of Spain. The highest income was received in Avila (9.2%), followed by Murcia (8.5%) and Castellón (8.5%). In Barcelona, the profit margin is 6.3%, while it drops to 4.8% in Madrid. Cities with garages having the lowest income earners are Salamanca with 2.4%, followed by Granada (3.1%), Ourense (3.2%), Lugo (3.3%), Santander (3.3%) and Palencia (3, 6%).

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