Investment:Buy to Let Bargains in Spanish Cities
The rising tide of tourists to Spain isn’t what’s driving up property sales because foreign investors aren’t focusing exclusively on holiday properties. The marketplace is ripe with opportunity once you understand the forces shaping today’s real estate sales in Spain. Although 74 million tourists visited Spain in 2016, the poor pound to euro exchange rate knocked holiday home sales along the Costas to half of what they were last year.
Are you hoping to move to Spain in five years? Look past the holiday locations to 3 places where international investors are transforming the real estate market, pouring money into projects you might not know about. Have you researched the investment potential of Spanish property? CBRE, the leading global real estate investment firm, puts Spain at 6th on a list of the world’s largest real estate investment markets.
Buy-to-let is driving Spain’s real estate recovery
In Spanish 3 biggest cities, buying-to-let is booming as foreign investors flood the marketplace. Prices are still low and high demand for rentals has pushed rents up by 5% since last year. 2016 sales figures, tallied by Spain’s financial daily paper, Expansión, reveal that landlords accounted for 1 in 3 property purchases in Barcelona, Madrid and Valencia.
British investors can expect annual average yields of 5%, compared to 4.3% typical UK yields-today-but Spain is set to become more profitable. The UK has made 2 changes that’ll cut future landlord earnings: the 3% stamp duty and no longer being able to deduct mortgage interest from rental income. To woo investors, Spain is doing just the opposite: decreasing income taxes over the next 5 years.
Where are the best properties for long-term rental income in Spain?
Barcelona-Spain’s top year-round destination for tourists, where real estate is still under-valued, but rising steadily since 2014. Sales to landlords accounted for 40% of purchases from a major Spanish estate agency in 2016. Investors are driving hard bargains, scooping up re-sale properties that are rented within hours of going on the market.
Wealthy foreigners are choosing ultra-modern luxury high-rise apartments in the Diagonal Mar region where they enjoy spectacular views which include their yachts docked in the harbour. International investors purchasing Golden Visa properties over €500,000 also insulate this vibrant city from risk.
The most sought after neighbourhood is bustling El Born, but also popular and far more laid back is the beachside barrio of La Barceloneta. You could renovate one of the flats there and rent it long-term to one of the many international residents. For cultural attractions (non-existent in regions like Costa Blanca) La Barceloneta would be a stimulating beach retirement location.
Madrid-At the centre of Spain lies the most populated area; rents are highest in the heart of the city. Avoid uber-popular Salamanca where prices are inflated to around 40% more than they’re worth. Better, also expensive regions (rewarding you with better yields) are Chamartín, Chamberí and Retiro.
The ideal buy-to-let purchase in Madrid is a two to three bed flat of around 100 square metres with a lift and that much-coveted bonus: ample parking. Enhance your investment’s value by purchasing nearby garage space.
The shift away from coastal resort investment to the cities is underlined by a mega-resort project planned for the Madrid’s outskirts. A US firm is putting €2.2bn into a massive tourist project that’s expected to bring 5 million visitors a year and generate €4-6bn in the first 5 years.
Valencia- Spain’s third largest city is far more affordable, expat friendly and less touristy than Barcelona or Madrid. It’s large enough to offer plenty of culture and nightlife, a fusion of modern and tradition but compact enough to have a neighbourhood vibe. Beautiful beaches bring visitors, as does Spain’s 2nd most popular attraction: The City of Arts and Sciences. The ultra-modern complex includes Europe’s largest aquarium and a zoo and arts events attracting 5 million visitors a year.
Valencia’s the bargain beach city where you’ll still find many properties selling for under €30k that can deliver a 15% gross rental yield. The highest rental rates are seen in Riu Turia, overlooking the majestic central park. Flats near the busy port make good student rentals for nearby universities. The Canovas and Avenida de Francia areas are expat favourites, commanding higher rents.
Check out the popular neighbourhoods of Russafa and Benimaclet, but see the property on a weekend evening to be sure local bars aren’t too noisy. Avoid buying in the beach neighbourhood of Cabanyal, because it’s cut off from the centre and has higher crime, especially at night.
Think outside the box when buying a property to let long term
It pays to find out as much as you can about the seller when you’re looking for a long-term letting. Perhaps the buyer slipped behind on a mortgage, but they’re otherwise credit-trustworthy? The easiest way to become a landlord is to buy from them and let them remain as tenants. It’s a win/win for you and the distressed seller who wants to stay on.