Spain is a very popular destination for foreign property investors, as demonstrated by the high percentage (16%) of international buyers who make up the market.
This can be attributed to both its natural beauty, and the variety of real estate options which the different regions of the country offer.
The gross average rental yield for a property in Spain is 4%, which puts it in the upper range of returns for the major European countries. Although the market took a significant hit this year due to the Covid-19 pandemic and other economic factors, there hasn’t been a substantial collapse, which there was in 2008.
Spain’s economy relies on tourism, particularly in the coastal areas, so lockdown restrictions around Europe have significantly decreased income from this sector.
However, the Spanish property market is more resilient than it has previously been, and so the country will remain an attractive proposition for purchasing property moving forward into 2021.
With that in mind, let’s examine which regions are worth considering for a potential buyer or investor in Spanish property.
Madrid is the financial hub and capital city of Spain. Over the years, it has become the headquarters of many tech and telecommunications companies such as Nokia, Ericsson, and Motorola.
It is also Spain’s most populous city and one of the main targets for foreign investors in the property market. In the first half of 2018, there were almost 5,000 property sales to foreigners alone.
The current value of the property market in Madrid is the highest it has ever been, and the prices are rising to reflect this – at the start of 2019, the average price of rental was 13.51 euros per square metre.
The average yield for prime residential real estate in Madrid is 3%, above London at 2.9%, and the volume of investments in real estate amounted to 4.15 billion euros in 2017.
In terms of attractive features, Madrid is home to two of the biggest football clubs in the world, Atletico Madrid and Real Madrid. It also has a thriving nightlife culture, and countless stunning tapas bars to try out.
Whereas Madrid is the financial hub of the country, Barcelona is known for being a startup hub, and full of art-nouveau buildings, of which it has the most in the whole world.
Between 2013 and 2018, it attracted approximately 2.22 billion euros in private equity investment, making it one of the biggest sources of venture capital in Europe. This can be put down to the huge amount of software developers in the city, who are in general less expensive to employ than in many other European locations.
Monthly rental in Barcelona is comparably expensive to Madrid, averaging at around 1,000 euros per month for a studio apartment. With 3.5%, Barcelona has a slightly higher yield than Madrid in prime real estate, which places it among the best major cities in Europe for this category.
Barcelona’s investment volume in real estate increased dramatically by 750 million euros from 2015-2017, to a total of 2 billion euros.
It is also ideally located for getaways to nearby towns on the Costa Brava such as Tarragona, or other European cities due to a good network of flights from the El Prat airport.
Andalucia contains a higher percentage of expats from Britain than any other region in Spain, and is also the most popular destination for tourism as there are thousands of resorts which cover the entirety of the Costa del Sol.
Due to the vast amount of property development, which is greater than the demand, the prices are considerably lower than in other major cities in Spain. For example, as of 2019, the average rental price in Malaga is 10 euros per square metre. Malaga also has a gross average rental yield of 4.66% in the city centre and 5.24% outside the city centre.
One of the main reasons for such an influx of migrants into the region is the weather – Andalucia is said to consistently have over 300 days of sun each year.
Mallorca and the Canary Islands
Mallorca is a hotspot for purchasing property in Spain, as it also has incredible weather and a beautiful coastline accompanied by dramatic mountain scenery. It is particularly popular for keen hikers and cyclists as the island is covered with stunning mountain trails.
Lots of complexes equipped with pools and spas were built in Mallorca around a decade ago, but since then, development on the island has slowed down.
On the opposite side of Spain, off the coast of north-west Africa, lie the Canary Islands. They are known for their idyllic weather, where the warm temperatures stay at a comfortable level all year round. It is geographically a fascinating region, with sand dunes, tropical forests, and waterfalls all waiting to be explored.
The islands have a high percentage of foreign nationals living there (one in six), many of whom have taken advantage of the corporate tax advantages for business investors, which are much lower than Spain’s average.
The main island of the Canaries, Gran Canaria, has one of the highest average rental yields in the country at 6.8%. As of 2019, the average house prices across the canary islands are at 1,604 euros per square metre.
The Basque Country
Traditionally, the Basque Country has not been a particularly popular region for foreign buyers, but this reputation is undeserved. It is known for being one of the wealthiest regions in Spain, and has the highest standards of living in the whole country.
Unlike the central and southern regions, the climate is a lot more temperate which allows for a tremendous amount of greenery. The average rental price for an existing home is €10.82 per square metre for the region.
Vizcaya is one of the main provinces in the Basque Country and contains 80 kilometres of sandy beaches along the northern coast. The rapidly-developing commercial port city, Bilbao, is situated along this coastline. It is home to the infamous Guggenheim museum, and won the European City of The Year award in 2018. The average rental yield for a property in Bilbao is 4.11%.
San Sebastian is the other main city in the region, and is known for being a luxurious destination, comparable to Nice and Monte Carlo. It has many wonderful seafood restaurants and stunning views across the Bay of Biscay. It also hosts one of the most famous food festivals in the world, the San Sebastian Gastronomika. The average rental yield for a property in San Sebastian is 3.4%.
The examples listed above demonstrate the amazing variety which Spain offers to a prospective real estate investor. The full impact of Covid-19 on the Spanish property market is still yet to be completely understood, but there is enough confidence in the market to suggest that Spain will still be an attractive proposition for foreign investors.
Even though the regions differ greatly in their pricing and availability, they all have unique cultures and perks to try out. Whether you are looking for cheaper apartments in the South of Spain or more luxurious complexes along the Northwest coast, there is plenty to choose from. Either way, you will feel “como en casa” in Spain!
*Jan Večerka is CEO of Brikkapp, a research and analysis platform for real estate crowdfunding
<!– –> This post has originally been featured in Property Investor Today.