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Property investment return in Spain is very strong: +10%

According to statistics released by the Central Bank of Spain in March 2022, the return expected on the residential Real Estate market in Spain is 10% – Green line on the chart.

This performance comes from two sources:

• gross rental yield estimated at 3,7% –Blue line on the chart– and
• capital gain estimated at 6.3%.

Here is what we will cover in this article:

The Spanish real estate market post Covid 

As we wrote last year: three main trends remain active:

• people are buying bigger, with more outside spaces and lights
• people are buying outside big cities
• foreigners are less active due to travel restrictions (but at HTBIS we could see a strong pick up in activity since end 2020)

Don’t miss our detailed update of last year: What are the impacts of Coronavirus on the Spanish Real Estate Market?

1. Spanish real estate return is back above 10% as in May 2019

    

   Of course, the uncertainty on the economy that came from Covid was noticeable in 2020 but since 2021, the market is rebounding strongly both in terms of transactions and prices. Have a look at our Spanish real estate quarterly report for more.

    

   Have a look at our interactive chart (yes when you come back, it will be updated)

    

    

2. Mortgage rates in Spain are very close to the lowest levels ever at 1.6%

    

   1.6% in March 2022, Red line on the chart

    

   

   Get the best mortgage rate in Spain

    

   You can always find that information updated on our “Returns & Mortgage Section” and read our article updated every month with the current mortgage conditions: Find the best mortgage rate in Spain

   Maybe interest rates won’t stay that low for a long period of time… they rose to 3% during the summer of 2018 but back to 2% one year later. Another data pointing into that direction is the inflation spiking. That is why real estate investors are taking a fixed rate mortgage right now. Read more on that: Fixed or variable rates mortgage?

   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:

    

   

   We developed a detailed mortgage calculator: Payment schedule, monthly payments,…

   The first real positive return since the crisis of 2008 came in early 2014 … six 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. The performance was much stronger in 2018 as the estimated profitability was higher than 10%. Right now, with close to 6%, the estimated profitability covers by more than 3 times the current mortgages costs.

   Follow this link if you want to learn more about our partner, one of the leading Mortgage brokers in Spain.

    

3. Real estate prices are lower than 10 years ago

    

   Is there a lot of downside from here? Check the chart of real estate price evolution before and after 2007:

    

    

4. Spanish real estate returns have the second weakest performance in Europe on a 10-year time frame 

   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

    

   

   European House prices index

    

   As you saw on this histogram, Spain has the weakest performance on a 10-year time frame. Click on the chart to check the performance for other period lengths.

    

5. Spanish Real Estate has the highest yields vs many European Cities

   Discover the best new build projects in Spain available right now

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   3 beds 3 baths 105 m²

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   3 beds 3 baths 203.36 m²

    

   Is Spanish property a good investment? Spain is in the sweet spot for property investment if you check the real numbers!

   Buy to let? Spain offers some of the best returns in Europe:

   • Madrid is at the 7th place in Europe with a return of 3,9% and offers one of the best rental yields in Spain with more safety on your investment.
   • Alicante took over the second place one of the best rental yields in Europe with a return of 4,6%, not bad
   • Barcelona is the eleventh cities in Europe with a yield of 2,2% according to Deloitte. Rents went down heavily in Barcelona for a few reasons, in 2020, the local authorities did introduce a cap on rents… while at the same time the lock down was quite strong and a lack of demand from international businesses. We wouldn’t be surprise to see the yield come back up in the years to come.

   Check the best rental Yields for the major European Cities, Madrid and Alicante have rental yields close to 4%.

    

    

   Barcelona and Madrid are the 5th and 8th most expensive European cities in terms of price/m²…

   Have a look at our interactive chart

    

   But check on the above chart, the price/m² in London is 7,916€/m² and 12.917€/m² in Paris… while Barcelona and Madrid are closer to 6.000€/m² and 5.000€/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 Alicante are much higher than the ones in Paris and London.

   Do you think that the downside risk is higher in Barcelona and Madrid than in Paris and London?

    

   

    

6. Real estate activity was strong in 2021 post Covid

   Close to 95.000 properties were bought by foreigners in Spain in 2021 (12 months to September 2021) and more than 545.000 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):

   

   Most expensive Spanish real estate markets_ 12 months to Sept 2021

   Here is as well our report on the Most active cities in Spain in 2019 (in terms of transaction).

    

7. Big uncertainty for the Spanish economic activity

   Of course, we noticed a strong rebound in early 2020,… stopped by the Covid, but activity is back now in 2021, what a roller coaster!

   Check our up to date tables of a few Economic indicators in Spain:

   But after this strong rebound, as everywhere in the world, we wait for the uncertainty to settle and the vaccines to allow more “normal” economic activity.

    

8. Financial markets will be more volatile

   After the negative returns noticed in the financial markets in 2018 and the high volatility, 2020 saw a huge spike in volatility due to Covid but at the same time Central bank poured money to support economies.

    

   In 2022, we expect higher volatility in financial markets due to the change of policy from central banks all over the world. This could help the real estate market but if rates are rising too much, it should be a negative. Of course, a big unknown is what are the economic impacts that will be seen in the next years due to Corona.

    

9. Spanish real estate outlook for 2022

   We are optimistic about the outlook for the real estate market in Spain in 2022. While we have to admit that the comeback post Covid of the Spanish real estate market (and everywhere in the world) was quicker and stronger than we expected. But if we compare it to international markets, the rise is reasonable and not speculative. So, in our mind we don’t see a real estate bubble here.

10. All our charts of this article are available here in a downloadable format

    

    Property return in Spain

    

    Rental yields for European Cities

    

    Price and rental levels for European cities

    

    Foreigners real estate activity in Spain

     

    

    Real estate prices and transactions in Spain

11. Do you want to search further?

    First start with our exclusive property buyers guides:

    

     

    Have a look at our interesting articles:

    • 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 😉 .
    • 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

     

    Source: Deloitte property Index 2020,  Overview of the European Residential Market

     

    Looking for a local property hunter, a local lawyer, … any expert in Spain? Ask us directly!

    

    Stéphane 

    Senior analyst and strategist at HTBIS

    Check the full HTBIS team here

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