Neither bank deposits, nor stock exchange or bonds, but real estate investments are the most profitable capital investments in Spain. At the moment, there are no other financial products of low risk close to the profitability indexes shown by real estate purchases.
Spanish real estate investment profitability amounts up to 8.3%
According to the Bank of Spain, the profitability of the real estate sector has reached the mark of 8.3%. This number is composed by a rental market rise of 4.4% and a real estate asset rise (+3.9%). As a comparison, purchasing state bonds for 10 years assures the profitability of 1.2% approximately, meanwhile bank deposits offer about 0.3% of profitability.
According to the experts, the steady Spanish real estate price rise and the increase in rental demand are the unmistakable signs of market stabilisation which turns real estate into an exceptional investment asset with a great profitability. Investors, in their turn, are not looking for a quick profit anymore, they do not try to resell purchased properties at a higher price; they prioritize getting a stable income through real estate rental. Rental, in its turn, sets new records in terms of its popularity, especially in such cities as Barcelona and Madrid.
Barcelona and Madrid are the most rapidly growing real estate markets
As of the end of 2016, the rental cost in Barcelona has grown by the record 16.5% and now it amounts to 17.9 euro per square metre. The most expensive properties for rent are still located in the Passeig de Gracia area, the average rental price per square metre here is 32.2 euro (+9%). The rental cost in Madrid has risen up to 15.6% and now it amounts to 14.4 euro per square metre.
In general, the real estate rental cost has risen in all Spanish autonomous provinces. However, experts say that now this is not about another housing bubble. Rental demand rise has not caused a rapid rise in the offer; on the contrary, it remains quite limited. Apart from the scarcity in the offer, the price also rises due to the fact that the majority of existing rental contracts were signed during the years of crisis, and now, when signing new contracts, the prices are getting updated. Analysts emphasize the fact that the price level stays at a sensible level in comparison with other European countries.
New type of investors
In such a propitious situation not just professionals, but individuals see real estate as the best way to save and multiply their savings. Even when borrowing mortgage (in this case we are talking about low interest credits), such investments remain quite profitable: they amount to 8.2% of income minus 2% (even less in some cases) of mortgage payments.
This is why, if earlier this was about big foreign investors, now medium or small investors take part in the process. Moreover, according to “Urban Data Anlytics” (uDA) the most profitable real estate type in Spain in terms of future rental profitability are flats with less than 70 square metres of living space.
Before yielding to temptation to sign a real estate sale and purchase contract, one should pay attention to several important factors:
- investments in real estate in Spain demand patience since much time will pass until the purchase cost pays off;
- one should not take a risk and contract overwhelming liabilities; mortgage is a long-term loan; even if the interest is low, the payments should be proportionate to the income and other basic expenses;
- in order to make an investment as profitable as possible, it is important to make the right choice in terms of the real estate type, and, what is more, its location. It is necessary to study the market; the most profitable areas are the rapidly developing areas of big cities (first of all – of Barcelona and Madrid); do not neglect investment real estate specialist advice.
You can find more information about the most perspective types and locations of real estate in Barcelona and Catalonia here.
In order to stimulate the investment inflow, the government has adopted a new law giving right to apply for a residence permit after having invested not less than 500,000 euro in the real estate sector in Spain. For more information, click here.
Source: El Mundo.
In Top House Realty we carry out personal residential and commercial real estate selection and assist our clients in getting golden visas and investor residence permits. For more information, please contact us via telephones +(34) 93 179 4843, +(34) 652 856 854, +7 925 837 21 or e-mail firstname.lastname@example.org.