Real estate investment profitability in Spain drops due to the pandemic

Second quarter data from idealista's Real Estate Profitability Report

Real Estate Investment Spain
Real Estate Investment Spain
20 July 2021, Redaction

The gross profitability of buying a home to put it on the rental market in Spain has fallen over the last year to 7.1%. In the second quarter of 2020, the return offered stood at 8.2%. According to the study carried out by idealista, the main real estate marketplace in Spain, Italy and Portugal, the profitability obtained is 13 times higher, in the worst case, than the rates offered by 10-year government bonds (0.5%). Is real estate in Spain a good investment? Let's have a closer look at real estate investment profitability in Spain in 2021

According to this study, which uses the sale and rental prices of different real estate products to calculate their gross profitability, offices are currently the most profitable real estate investment in Spain. Buying an office in Spain to rent it out offers a gross yield of 11.4%, compared to 10.9% 12 months ago. Commercial premises offer a yield of 9.4% (9.3% a year ago) and in the case of garages and parking paces, the figure stands at 6.5%, down from 7.6% in June 2020.

Housing profitability in Spain

Among the Spanish capitals, Lleida is the most profitable when it comes to investing in residential property, at 8.2%. It is followed by Murcia (8.1%), Huelva (7.5%), Almería (6.9%) and Santa Cruz de Tenerife (6.8%).

However, the lowest yields in Spain are obtained by owners of rental properties in San Sebastian (3.6%), Palma (4.3%), Barcelona (4.4%), A Coruña (4.5%) and Madrid (4.6%).

Profitability of commercial premises in Spain

Commercial premises are the most profitable product in almost all the capitals. The highest return is obtained in Huelva (11.2%). It is followed by the returns gained in Ávila (11.1%), Oviedo (10.8%), Lugo (10.6%), Tarragona (9.9%) and Zaragoza (9.8%). In Barcelona and Madrid the rate is 8.5% and 7.8% respectively.

Teruel and Albacete offer the least attractive premises for investors (only 7% profitability in both cases), followed by Jaén (7.2%), A Coruña (7.4%), Palencia, Cádiz and Cuenca (7.5% in all three cases).

Profitability of offices in Spain

Offices in the city of Sevilla are where investors can get the greatest return among Spanish cities, with a gross return of 14.1%. It is followed by Huelva (11.1%), Toledo (10%), Zaragoza (8.7%), Burgos and Vitoria (8.3% in both cities). In Madrid, the profitability drops to 6.8% and in Barcelona to 6.3%.

On the other side of the spectrum, we find the yields of A Coruña (5.7%), Valencia (6.1%), Las Palmas de Gran Canaria (6.2%), Barcelona (6.3%), Palma and Bilbao (6.4% in both cases).

The office market in Spain is not as uniform as others and as a result, it is impossible to obtain statistical data for almost half of the Spanish capitals.

Profitability of garages and parking spaces in Spain

Garages and parking spaces are, in contrast, the least profitable product for investors in many Spanish cities. The highest profitability is obtained in Ávila (10.3%), followed by Murcia (9.6%) and Castellón (8%). In Barcelona the rate of return is 6.3%, while in Madrid it drops to 4.8%.

The city with the least profitable garages is Salamanca, with 2.4%, followed by Ourense (3.1%), Lugo, Santander and Jaén (3.3% in all three cases).

Methodology

In order to prepare this study, idealista has divided the sale price offered by the rental price requested by owners in the different markets with reference to the quarterly indices of homes, commercial premises, garages and offices corresponding to the second quarter of 2021. The result obtained is the gross percentage of profitability that a homeowner obtains from renting out his or her property. This data facilitates the analysis of the current state of the market and is a basic starting point for all those investors who want to buy real estate assets in order to obtain profits.

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