Gross rental yields based on the asking prices of homes offered for rent and sale rose to 5.5% in 2015, according to the property portal Idealista.com.

On average, buy-to-let investors should be getting a better return if the Idealista figures paint an accurate picture of the relative change between rental incomes and purchase prices.

Housing now looks a better bet than supposedly risk-free 10-year Spanish Government bonds, currently offering 1.7%. Buy-to-let investors might also assume they will bank capital gains as house prices rise on the back of a recovery after seven years of crisis and a peak-to-present fall of around 50%. “The property market is starting to pick up and housing has regained its appeal as an investment product,” says Idealista.

Gross rental yields go up if rents increase relative to house prices, which can happen if rents rise faster than house prices, or fall less than house prices, or remain unchanged as house prices fall. In recent years house prices have been falling faster than rents, driving up yields.

Using its massive database of listings, Idealista divides the average asking price of rents per location by the average asking price of homes for sale in the same locations, to get a gross yield based on asking prices. Though perhaps a reasonable approximation, this is not the same as the actual gross rental yield of housing in Spain, which would be based on real transaction prices.

So, for example, if sales prices close on average 20% lower than asking prices, whilst rental prices close only 10% lower, that would mean that actual rental yields are higher than the Idealista’s yield based on asking prices.

BY TYPE OF PROPERTY

Big investors are still focused on commercial property, which yields 7.3%, up from 6.9% a year before, say Idealista.

Garages are yielding 4.4%, whilst office space is down from 6.7% to 6.6% in a year.

BY REGIONAL CAPITAL

Lleida (Lérida), capital of the eponymous Catalan province, currently offers the best yield for buy-to-let investors (7.9%), followed by Las Palmas de Gran Canaria in the Canaries (6.4%), Palma de Mallorca in the Balearics (6.2%), and Alicante, home to the Costa Blanca (6%). Barcelona offers 5.4%, and Madrid 5.3%.

At the other end of the scale, the meagerest pickings for buy-to-let investors are to be found in Galicia’s Ourense (3.4%), La Coruña (3.6%) and Lugo (3.8%), and San Sebastian, in the Basque Country (3.6%)

The following table by Idealista shows the rental yields for provincial capitals, with housing in the first column to the left, followed by office, commercial, and Garages. The last column shows the 10-year Spanish Government bond yield for comparison.