Spanish residential rental yields are rising, but still have a long way to go.

The average gross rental yield in Spain has risen to 4.08pc,up from a low of 3.29pc in June 2008, according to new figures from the Bank of Spain.

As you can see from the graph above, gross rental yields in Spain still have a long way to go to reach their previous peak of 6.53pc in December 1998, when the Spanish property boom was just warming up.

The gross yield is the gross annual rental income divided by the price. Net yields, after costs and taxes, tend to be a few percentage points lower.

Average Spanish rental rates are falling, but average property prices are falling faster, which is why yields are rising.

The Spanish property portal idealista.com has produced figures showing average gross retal incomes by region, based on the portal’s data in 2011 (table below). The column on the far right shows the price in years of rental income, whilst the second column from the right shows the gross yield.

The province of Toledo (Castilla La Mancha) offers the best rental yields in Spain (6.13pc), whilst Pontevedra (Galicia) offers the worst (3.35pc).