Follow this link if you are looking for the last update on the real estate prices in the top 20 Spanish cities.
Spanish property market return is back strongly: +10.5%
According to statistics released by the Central Bank of Spain in January 2019, the return expected on the residential Real Estate market in Spain is 10,5% – Blue line on the chart.
This performance comes from two sources:
- gross rental yield estimated at 3,99% –Green line on the chart– and
- capital gain estimated at 6.51%.
The first good news: 10.5% is one of the highest expectation since 2008!
Have a look at our interactive chart (yes when you come back, it will be updated)
The second good news: mortgage rates are close to 2% and remain at the bottom of their 10-year range
2.34% in January 2019, Red line on the chart
Maybe interest rates won’t stay that low for a long period of time… Look at inflation, it is picking up… Look at long-term interest rates in the United States… they rose to 3% as of June 2018 but back to 2.5% end of 2018.
Have a quick look at our Spanish mortgage calculator if you want to know what is your purchasing power to buy a property in Spain:
The first real positive return since the crisis of 2008 came in early 2014 … four years ago…
As you can see on our chart, the estimated return became slightly positive for the second time since 2008 at the start of 2014. In 2010, the estimated return went slightly positive but it was not enough to compensate the mortgages costs. This time, the performance is much stronger as the estimated profitability of 11.2% covers by more than 5 times the mortgages costs.
The third good news: Real estate prices remain lower than the prices of 10 years ago
Is there a lot of downside from here? Check the chart of real estate price evolution before and after 2007:
The fourth good news: Spain has the second weakest performance in Europe on a 10-year timeframe
Have a look at the comparison of the real estate market in Spain vs other European countries on any time frame between 3 months and 10 -year time frame
As you saw on this histogram, Spain has the weakest performance on a 10-year timeframe. Click on the chart to check the performance for other period lengths.
The fifth good news: Spanish Real Estate is cheap and has the highest yields vs many European Cities
Invest in property in Spain? Spain is in the sweet spot for property investment!
Buy to let? Spain offers some of the best returns in Europe:
- Barcelona has the highest rental yield in Europe and
- Madrid and Valencia are fourth and fifth with the same yields as Rome and Amsterdam according to Deloitte.
Check the best rental Yields for the major European Cities, Madrid and Barcelona have rental yields close to 5%.
Barcelona and Madrid are the 7th and 8th most expensive European cities in terms of price/m²…
But check on the above chart, the price/m² in London is 16.500€/m² and 10.700€/m² in Paris… while Barcelona and Madrid are at 4.000€/m².
You read it correctly: less than one-quarter and one-third of the price of London and Paris. Period.
Now, you understand why the returns in Madrid and Barcelona are nearly twice as high as the one in Paris and London.
Do you think that the downside risk is higher in Barcelona and Madrid than in Paris and London?
The sixth good news: Activity is picking up
Close to 100.000 properties were bought by foreigners in Spain in 2018 and more than 475.000 by Spaniards.
It looks like others agree with our conclusions…
Check for more information our up to date pages on the Spanish national real estate market (prices and activity) and on the Spanish regional real estate markets (prices and activity).
If you want to have a deeper analysis, city per city, we would suggest reading our full report on that (click on the picture):
Here is as well our report on the Most active cities in Spain in 2018 (in terms of transaction).
Spanish economic activity remains strong
Check our up to date tables of a few Economic indicators in Spain:
- Unemployment went from 26% to 14.7%
- Car sales are recovering, +60% vs 5 years ago
- GDP is one of the strongest in Europe with expectations for 2019 above 2.2%
We wrote this article on the Spanish GDP expectations: Spanish GDP growth to remain strong up to 2021
Financial markets suffer from negative performance and volatility
With the negative returns noticed in the financial markets in 2018 and the higher volatility, as long as the economy is growing, investors should keep a strong interest in real estate investments.
Other experts’ expectations for 2019
In an article published by the Spanish journal, EXPANSIÓN, on the 8th of January 2019, experts predict for 2019 price increases of 5% and 13% more transactions. At the same time, they see rental prices to continue to increase by 10%. While Barcelona and Madrid had strong prices increases since 2014, they think that the price action could be more for second-tier cities like Valencia, Malaga, Palma or Seville. Other cities like Alicante, Tarragona, Bilbao, Murcia or Zaragoza could see interest according to them. Read the article in Spanish.
To be honest, we noticed this trend for Valencia starting already end 2017. That’s why we organised there our first Real estate city trip with our local property finder. Check our article on that if you want: Real estate market Valencia Citytrip feedback – April 2018 We noticed as well a lot of interest for Tenerife on our website.
Do you want to search further?
Have a look at our interesting articles:
- Spanish Real estate market vs the other European markets – Our quarterly update
- Madrid investment case study
- Barcelona investment case study
- Tenerife property investment case study
- Six reasons to love your property shopper
- Top 10 reasons why we think that the Spanish market is a nice real estate opportunity right now, we bought ourselves in 2014, let’s put our money where our words are 😉 .