One of the most profitable businesses in Spain, and one that combines this profitability with a moderate risk, is buying a home to rent it out. Yes indeed, according to data from urbanData Analytics, gross rental profitability in Spain has decreased by 8.3% in the second quarter of 2021 with respect to the first three months. Therefore, this remains at 7.01%. This drop is a direct cause of the crisis caused by the pandemic, which caused rental prices to fall, while the purchase value of a house has resumed growth.
According to experts from urbanData Analytics, the gross rental return is calculated taking into account the maximum annual rental income and the purchase price of the home. On the other hand, maintenance and rental management expenses are not considered, as well as turnover and empty months due to lack of rent.
However, not all provincial capitals are equally profitable and there are great differences between them. The most profitable in Spain is located in Catalonia. Lleida has a gross profitability of 7.93%, the highest rate after the end of the second quarter. Huelva (7.54%), Murcia (7.47%), Ceuta (7.23%) and Zamora (7.08%) accompany the Catalan city as the only ones with a 7% increase in gross profitability and which, therefore, are above the average.
Practically half of the provincial capitals of Spain exceed a gross profitability of 6%. In this group are Segovia (6.95%), Santa Cruz of Tenerife (6.89%), Castellón de la Plana (6.84%), Almeria (6.78%), Tarragona (6.69%) or Soria (6.68%), as well as others with somewhat lower profitability such as Toledo, Lugo, Cuenca, Oviedo or Cáceres.
Among all of them, there are cities that have grown especially in this second quarter. According to the same data, in Ceuta, Zamora, Lugo, Cuenca and Melilla the growth has been close to 10% with respect to the first three months. However, others like Teruel (-10%, the most important drop), Saint Sebastian (-4.13%) or Cordova (-3.03%) are experiencing the opposite situation, with falls in their gross profitability.
Lower return cities for homeowners
The provincial capitals in which the owners obtain a lower economic performance are San Sebastián (3.37%), Palma (4.40%), A Coruña (4.70%). Madrid and Barcelona are also placed at the top of the table. Specifically, in the capital of Spain the return for the owner is 4.87%, while in Barcelona it reaches 4.76%. These are the cities that have suffered the most from the impact of the coronavirus, since the rental market for both, as well as the purchase market, had begun to moderate before the impact of the pandemic. However, after her rental prices began to fall. On the contrary, the purchasing market has practically recovered its previous levels to the pandemic.
Gross profitability of the provincial capitals
–Santa Cruz of Tenerife: 6.89%
–Castellón de la Plana: 6.84%
–Palmas de Gran Canaria: 6.24%
–Real city: 5.97%
–A Coruña: 4.70%
–Saint Sebastian: 3.37%
“Both remain stable markets, with high dynamism due to high absorption rates and very short times for both sales and rentals”, explains Manuel Cacho, director of solutions at urbanData Analytics. The expert explains that in some neighborhoods, certain types of housing can offer a return higher than the city average. For this reason, he advises carrying out a microlocated analysis to “identify the opportunities with the highest returns and low risk”.
Evolution in the second half of the year
UrbanData Analytics expects this negative trend to change as the Spanish economy recovers. “Nevertheless, Already in 2019 and early 2020, some municipalities showed slowdowns in rental price growth“explains the director of solutions.
Finally, from the proptech they believe that this is a good time to invest in real estate. “We are in a mature cycle, despite Covid-19; and although some assets present very compressed returns we observe investment opportunities in geographic areas where certain assets were not traditionally focused“, concludes Cacho.
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