Buy-to-let investors are now one third of the market in key cities

El Cabañal District, Valencia, property

El Cabañal District, Valencia, where buy-to-let investors in the city are now 37% of the market

The face of the Spanish housing market continues to change post-crisis as buy-to-let investors now account for a third of the market in cities like Barcelona, Valencia and Madrid.

Buy-to-let is an increasingly a popular investment in Spain claims Tecnocasa – a franchise chain of estate agents with office all around the country – with rental investors now making up a third of the market in big Spanish cities like Barcelona, Madrid, and Valencia, according to company data based on sales handled by Tecnocasa.

Barcelona is the most popular city amongst buy-to-let investors, with 40% of sales made for that purpose, followed by Valencia with 37%, and Madrid with 33%, all according to Tecnocasa data. The national average is 26%, according to a recent article in the financial daily Expansión.

Recent research by the Spanish property portal Idealista reveals that rental returns have increased to an average of 6.1% gross (based on asking prices, not transaction prices), up from 5.5% a year ago. The provincial capital of Lleida, in Catalonia, offers the best yields with 7.7%, followed by Palma de Mallorca in the Balearics (6.7%), Las Palmas de Gran Canaria (6.5%), and Alicante, home to the Costa Blanca (6.5%). Barcelona and Madrid both yield 5.5% based on asking prices.

Assuming rental asking prices are higher than actual prices, and that sales closing prices are lower but the all in costs are around the same once Spain’s high transaction costs are taken into account, then rental yields in Barcelona and Madrid would work out between 4% and 5% gross, and maybe 2% to 3% net. That’s not a very interesting yield in ordinary times, but these are not ordinary times. Local investors get a pittance on their savings in the banks, whilst fixed income and funds are all looking unattractive for one reason or another. Given that Spanish property prices now look like they are on a recovery path, it’s not surprising that local investors are focusing on buy-to-let in the main cities, even if yields are nothing special.

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