What is property profitability in the Spanish market?
According to a study by Idealista, the average profitability of a property in Spain is more than 7%. We are talking about renting out apartments. At the same time, the investment company Masteos has found that in some regions, you can get a return of 8% even if you invest less than 80,000 euros in buying a property.
In the study, experts assessed the profitability of 35 cities. As a result, the experts have identified ten where the investment can be no more than 80 thousand euros, but the income can be quite decent. Among these cities:
– Tenerife: renting an apartment here can cost more than 10 euros per square metre per month;
– Jerez de la Frontera: the monthly income is 8 euros per square metre;
– in Sagunto, you can get around 7.7 euros per month.
There are 15 municipalities with the highest house prices. Here are the top three:
1. Madrid – at 17 euros per square metre, the yield is just over 6%. The purchase of a home will cost between 120 and 200 thousand euros;
2. Valencia: the price per square metre is 12 euros;
3. Alicante – a square metre of property will cost more than 10 euros.
A good option in terms of profitability is to rent a property in Elda, Alicante. Here, the price of a house is less than 80 thousand euros, but the return will be 11.1%. By comparison, investing 80-120 thousand euros in a property in Ourense will yield a return of around 9%. The return will be even lower in other areas with the same level of investment.
Factors affecting the property profitability in Spain
The country’s government has passed a new law that could have a negative impact on the development of the rental sector. It imposes a number of restrictions on landlords. The main one is a ban on increasing the rent to compensate for costs not included in the contract.
Owners of more than five properties are now called large landlords. Previously, owners of more than ten properties fell into this category.
By law, there are some areas where there can be no rent increase. These include places where the cost of housing and basic services is more than 30% of the population’s average income. Rents are also frozen in areas where property values have risen by 3% or more in the last five years.
The government has increased the amount of property tax that owners must pay annually if no one has lived in the property for more than two years. This rule applies to owners of 4 or more properties. In this case, the amount of tax can be 150% of the standard rate.
As for property developers, the new law obliges them to allocate 30% of new buildings to social housing.