Top 5 cities in Spain for investment in rental properties


In connection with the recovery of the Spanish real estate market, there has been a steady increase in demand for both the purchase and rental of housing in the vast majority of the country’s major cities. In particular, according to the profile portal www.idealista.com, by 2020 the average cost of one square meter of residential real estate reached 10.9 euros, which is almost 15% more than in 2006 – even before the financial and economic crisis in Spain. .

In this regard, the profitability of the corresponding investments has also increased, although this rule does not apply to all cities or even entire autonomous communities. Thus, as of the beginning of 2020, the ranking of the top 5 cities in Spain for investment in rental property is as follows:

1–2.Lleida (Catalonia) and Santa Cruz de Tenerife (Canary Islands)


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Lleida

According to calculations made by the Central Bank of Spain, investments in housing will pay off the fastest in the capitals of the Catalan province of Lleida (Lleida) and the island of Tenerife – within 14 years. In the latter case, this period three years ago was 19 years, but the decisive factor was the rapid increase in rental costs – from 5.8 to 8.9 euros per square meter.

3–5.Huelva, Almeria (Andalusia), Murcia


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Huelva

In these cities, the average payback period for investments in residential real estate ranges from 15 to 16 years. At the same time, Almeria and Murcia entered the top five only by the end of 2018, and previously this figure for them was almost 20 years.

Some of the most cost-effective cities for purchasing rental property in Spain also include Las Palmas (Canary Islands), Tarragona (Catalonia), Alicante (Valencian Community) and Avila (Castilla y Leon). Investments in residential real estate will take the longest to pay off in cities such as Madrid and Barcelona (21 years each), La Coruña (21.5), Ourense (23) and San Sebastian (24). Nevertheless, the general tendency for Spain to shorten this period is clearly visible, although it is necessary to take into account the significant differences in prices depending on a particular area. For example, in the capital Salamanca, where the wealthiest segments of the population mainly live, full payback will have to wait 27 years, and in such “proletarian” areas as Villaverde or Puente de Vallecas it will take 12–13 years. Approximately the same ratio between “rich and poor” is observed in Barcelona: Sarria-San Gervasi (26.3) versus Nou Barris (14.7).


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Las Palmas

For those potential landlords who are more interested in large incomes from renting out real estate without reference to the temporary period of housing ownership, the most attractive are the following cities in Spain (prices in euros per square meter):








Barcelona 17.3
Madrid 16.2
San Sebastian 15.3
Palm 12.3
Bilbao 11.9

However, it should be borne in mind that in the same Palma (formerly Palma de Mallorca) temporary restrictions were introduced for the rental of so-called “holiday housing” – no more than three months a year, and it is possible that similar measures will be accepted in other cities that are very popular among tourists.


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San Sebastian

Based on this, it makes sense to pay attention to a number of coastal cities where the tourist flow is regular and stable. In this case, the Top 5 cities in Spain for investment in rental property will look like this (according to the portal www.fotocasa.es):










City

Provinces

Profitability
Algeciras Cadiz 6.6%
Tortosa Tarragona 6.4%
San Fernando Cadiz 6.2%
Cartagena Murcia 6.2%
Sagunto Valencia 6.2%


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Cartagena

The average rate of return in the country is 3.9%, and therefore it is not recommended to buy property in Spain for rent in the following cities located on the coast:














City

Provinces

Profitability
Zarautz Gipuzkoa 1.2%
Nerja Malaga 2.1%
Roses Girona 2.4%
Javea Alicante 2.5%
San Sebastian Gipuzkoa 3%
Cadiz Cadiz 3.4%
Marbella Malaga 3.6%
Suances Cantabria 3.6%
Calpe Alicante 3.8%



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