Investors can still see significant returns
Real-estate in Spain is still a great investment offering good returns, according to a study by property portal idealista.
The profitability of buying a property to rent in Spain has increased to an average return of 6.1%, up from 5.5% this time last year, due to a strengthening demand for rental properties.
The study, which looks at property sales prices and rental values for various property types, suggests commercial property is the most profitable real-estate investment, offering average yields of 7.7%, compared with 7.6% a year ago
Investing in residential property can offer returns of 6.1%, up from 5.5% last year, while investing in office space can offer a yield of 7.3%, up from 6.3% last year. The purchase and rental of a garage or parking space has soared to an average yield of 5.6%, up from 4.6% in 2015.
Housing Profitability
When looking at Spanish capitals, Lleida is found to be the most profitable when purchasing a home to rent with an average yield of 7.7%. Palma de Mallorca has an average yield of 6.7%, while Las Palmas is not far behind with 6.5%. Alicante and Huelva both have an average yield of 6.3%, while both Barcelona and Madrid will realise a yield of 5.5%.
In Malaga the average return on housing is 5.6%.
The least profitable capitals are San Sebastian and Ourense with a 3.7% yield, while housing in A Coruña offers a 3.9% return.
Profitability of Commercial Space
When looking at the yields on commercial space we see the highest return in Malaga with an average of 10.6%. Las Palmas, Zaragoza, Alicante and Cordoba all offer 8.4% returns, while commercial space in Barcelona and Madrid yields an average of 8.1% and 7.7%, respectively.
The lowest returns for commercial property are to be found in Castellón where investors can expect only a 4.8% return, followed by Caceres and Jaen with 5.5% and 5.6%, respectively.
Office Space Yields
Offices purchased in Cordoba offer the greatest yields with an average return of 8.1%. In Zaragoza you can expect a return of 7.2%, Ciudad Real returns an average of 6.8%, while Santa Cruz de Tenerife can return 6.6%. In Barcelona profitability on office space amounts to 6.2%, while in Madrid the average return is 6%. In Malaga the average yield on office space is 5.2%.
On the lower end of the scale for office space profitability we find Santander with an average yield of 4.6%, while Valencia, Bilbao and A Coruña offer 5%.
NB: The market for office space is not as uniform as other real-estate products which makes it almost impossible to gain statistical data from more than half of the Spanish capitals.
Garage/Parking Profitability
Despite seeing a significant increase in profitability, garage/parking space remains the least profitable real-estate product in many capitals. The highest returns are found in Las Palmas where investors can realise 8.2% returns, followed by Zaragoza with 8.1%. Murcia offers yields of 6.5% while Lleida offers an average of 5.9%. Garages or parking spaces offer an average yield of 5.6% in Malaga.
The least profitable garages and parking spaces are found in Barcelona with an average return of only 2.4%, while Salamanca offers 2.6%, and in Vitoria it’s 2.9%. In Madrid a garage or parking space could realise 3.3% return.
Methodology
To complete this study idealista divided the average selling prices of property by the average prices paid for rental within the different markets (homes, commercial premises, garages and offices) for the second quarter of 2016. The resulting figures represent a gross profit percentage returned by rental income. The data herein offers a basic analysis of the current investment market for real-estate and is a basic starting point for investors looking to add real-estate products to their portfolio. If is not intended as investment advice and is for information purposes only.
