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The profitability of buy to lets


How profitable is a buy to let apartment in the main Spanish cities? 


Many people believe that there is currently a bubble around the buy to let market. Although this is debatable, the truth is that buying a property in order to subsequently rent it out is a safe investment and subject to high profitability, especially when it is situated in the Spanish cities such as Madrid or Barcelona.   


Gross Rent Profitability in Madrid and Barcelona



At the moment, Madrid and Barcelona, ​​the two most important Spanish provincial capitals, enjoy a rental market that's in excellent health. This is especially advantageous for investors, who can enjoy gross profitability of between 4.1% and 4%, respectively. By using this scale, it means that these two cities are well ahead of Moscow (3.6%), Sydney (3.6%), London (3.4%), Hong Kong (3.1%) and Monaco (1.6%). 

However, these incredible figures are still far from those seen in Tokyo and New York. The capital of Japan offers its investors in the rental sector a gross return of 4.5%, while those who own their properties in the US city can obtain up to 4.7% in rental yield. 

Madrid - AdobeStock_105015620.jpeg

What Is the Gross Rent Profitability in the Rest of Spanish Capitals?


Although it seems quite unbelievable, but Madrid and Barcelona do not occupy the top positions in the gross rental performance ranking within Spain. This is mainly due to the fact that these two markets are more consolidated than the others throughout the rest of the country, which are experiencing much stronger growth. 


This is exactly what is happening in Las Palmas de Gran Canaria. The capital of the homonymous island offers its investors a 4.7% gross return. It is closely followed by Córdoba, Alicante and Huelva, all three with 4.4%. We should also mention Málaga, which can boast of offering 4.3%. Based on these figures, there is no denying that the property rental sector is going through an excellent time throughout Andalusia. 


If we pay close attention to these figures, in those cities where the rental market offers lower gross returns to investors, they are not too far out from the rest. In particular, we should mention Salamanca (3.5%), Ourense (3.4%), Lugo and Santander (3.2%) and A Coruña and San Sebastián (3%). 

Madrid - AdobeStock_107885465.jpeg

The Future Forecasts For the Buy to Let Market 



The truth is that right now the forecasts regarding the profitability that can be obtained by investors who buy a property to rent out could not be better. This is true even if we take into account the measures approved and planned by the Government of Spain with the purpose of regulating the market and stabilising it. Fundamentally, it is foreseeable that these regulations favour the appearance of a greater number of small and medium investors that, at this moment in time, do not have the sufficient funds to buy a property. 


For its part, we must bear in mind that in the near future, the asking price of homes will gradually begin to stabilise. During the last few years, the value of these properties has not stopped growing due to how much they hit rock bottom during the hardest stages of the crisis and the impact that this caused on the real estate sector. We are in fact getting closer and closer to the 2007 prices, except that now banks impose much lower interest rates that are accessible to consumers and investors. 


It is also necessary to refer to the properties and real estate packages that, at this moment, the Asset Management Company from Banking Restructuring or Sareb, more popularly known as the 'bad bank', has leveraged. The most optimistic forecasts affirm that these will attract a large number of interested parties from other countries. 


Taking into account the good situation of the market and the number of property sales as well as the interest in the buy to lets that exists in the main Spanish capitals, The financial institutions as well as the rest of the banks and lending companies are already starting to opt for some of these homes and choose real estate packages. However, it is estimated that there are still many reluctant investors who are waiting for the property market to reach its full potential and gain momentum. 


A Safe Bet For Investors


Based on the above data, it is clear that investors are facing a unique opportunity to obtain excellent returns thanks to the current real estate sector's situation. Undoubtedly, all the figures provided in this article are based on the various operations that these investors themselves carry out. Although the market is tending to stabilise, profit margins are still extremely attractive for investors and they offer minimal risks when compared to other types of investments.

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