Buying a house to rent out is increasingly becoming an option for small savers who expect some return. According to a study from idealista, the income obtained from investment in housing has increased by six percentage points in the last year to 7.8% in the first quarter of 2018, thanks to the strengthening of demand for rentals.
According to the study by idealista, real estate investment in Spain in all of the products analysed, offers rates of return that are three times higher than those of 10-year government bonds, and that’s in the worst-case scenario.
The return on investment in rental housing has increased to 7.8% from 7.1% a year ago, mainly due to the increase of rental demand.
According to this study, which relates the sale and rental prices of different real estate products in order to calculate their gross profitability, commercial premises remain the most profitable investment properties.
Buying a commercial property to rent out in Spain offers a gross return of 8.9%, compared to 8.3% a year ago. Offices offer a return of 8%, whereas one year ago it was 7.5%. Garages are the product in which profitability has increased the least this year, rising from 5.4% in the first quarter of 2017 to 5.6% today.
Profitability of residential properties
Among the Spanish provincial capitals, Las Palmas de Gran Canaria is the most profitable, with 8.1%. It is followed by Santa Cruz de Tenerife (7.4%), Lleida (7.3%), Huelva (6.9%), Almería and Castellón (6.8% in both cases). The profitability in Barcelona is 4.9%, lower than that of Madrid (5.4%).
The lowest yields in Spain are those obtained by owners of rented properties in San Sebastian (4.2%). This is followed by Ourense (4.3%), A Coruña (4.5%), Zamora (4.6%) and Pamplona (4.7%).
Profitability of commercial properties
Commercial premises are the most profitable product in most of the capitals. The highest returns were obtained in Zaragoza (10.6%), Pontevedra (9.7%), Cordoba (9.3%), Lleida (9.2%) and Barcelona (9.1%). In Madrid, the profitability of the premises remains stable at 8%.
Castellón offers the least attractive premises for investors (only 6% return), followed by Salamanca (6.3%) and Caceres (6.6%).
Profitability of offices
Offices in Santa Cruz de Tenerife have the largest return among the capital cities, with a gross return of 7.9%. It is followed by Malaga (7.5%), Zaragoza (7.3%) and Logroño (7.2%). In Madrid, profitability rose to 6.6%, while in Barcelona it fell to 5.8%.
At the other and of the scale, we find the performance of A Coruña (4.9%), Santander (5.2%) and Murcia (5.6%). The office market is not as uniform as that of other products, making it impossible to obtain statistical data for more than half of Spanish capitals.
Profitability of garages
Garages, by contrast, are the least profitable product for investors in many capitals. The highest profitability is obtained in Palma (7.3%), followed by Seville (7.2%), Girona (6.3%) and Lleida (5.8%). In Madrid, the profitability of renting out a parking space is 3.3%, while in Barcelona it is 3%.
The municipalities with the least profitable garages are Malaga and Oviedo, with 2.3% in both cases, followed by Salamanca, with 2.9%.
For this study, idealista has divided the rental price that owners ask for by the average selling price offered in the different markets referring to the quarterly indices of homes, commercial premises, garages and offices for the first quarter of 2018. The result obtained is the gross percentage of profitability that a property owner has to rent out their property. This data contributes to 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 make a profit.