Return on investment for property bought to rent increased in 2016 across all property types. The average profitability offered by investment in rental housing has increased to 6.3%, from 5.5% in the previous year, due to the higher growth rate of rental prices compared to sales prices.
According to a study by idealista, which looks at sales and rental prices of different real estate products to calculate their gross profitability, commercial premises remain the most profitable real estate investment. Buying a “local” in Spain to rent it out offers a gross profitability of 8.5%, compared to 7.3% in the previous year. Garages have increased to 6.1% (up from 4.4% in 2015). Offices have also increased in profitability to 7.6% (up from 6.7% in 2015).
Housing
Among the Spanish capitals, Lleida and Las Palmas de Gran Canaria are the most profitable, both with rates of 7.1%. They are followed by Huelva (6.7%), Malaga (6.3%), and Alicante (6.2%). In Barcelona, the gross profitability for rental housing is 5.5%, compared to 5.9% in Madrid.
The lowest yields are to be found in Ourense (3.7%), A Coruña (3.9%) and San Sebastián (4.1%).
Commercial Premises
Locals, or commercial units, are the most profitable real estate product in most capitals. The highest returns are found in Malaga (11.1%), followed by Alicante and Santa Cruz de Tenerife, both with 9.4%. In Bilbao, the average yield is 9.1%, while in Barcelona it reaches 8.6%. Commercial rents in Madrid offer an average return of 7.5%.
Castellón offers the least attractive returns for the investor at only 4.7%, followed by Almería (6.1%), while Vitoria, Girona and Palma de Mallorca all offer 6.3% gross profitability.
Offices
Offices rented in Cordoba offer the best returns amongst capitals, with an average gross return of 7.9%. Santa Cruz de Tenerife and Almeria both offer 7.1%, while in Zaragoza returns are at 7%. In Barcelona, the profitability amounts to 6.5%, while in Madrid and Malaga it drops to 6.3%.
At the other end of the scale we find A Coruña (4.6%) and Valencia (4.9%). In Santander, Bilbao and Oviedo the returns are at 5.3%. The office market is not as uniform as other products, so it is impossible to obtain statistical data for more than half of the Spanish capitals.
Garages
Garages are the least profitable real estate investment in many capitals. The highest profitability is obtained in Las Palmas de Gran Canaria at 8.6%, followed by Palma de Mallorca (6.7%), Almería (5.7%) and Malaga (5.4%).
The least profitable are Salamanca with 2.4%, Barcelona at 2.7% and Bilbao with 3%. In Madrid, the average return on investment for garages is 3.4%.
