Buying a property to let now generates a 10% profit

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A great time to invest

The profitability on properties is at a level similar to that of 2007.

There is an increasing demand for accommodation in Spain, especially during the summer months, and it is this demand that is driving the investment property market forward. With so many low-cost airlines servicing a wide range of the U.K. and other European airports into many locations in Spain on a daily basis, it is no surprise that investors choose Spain for solid rental yields on investment property purchases. Additionally, the internet revolution has greatly improved the occupancy rates for Spanish property investors, as more and more visitors avoid the traditional travel agents and book flights and accommodation online, being of huge benefit to landlords.

The housing market is generating levels close to 10% profitability. According to the Bank of Spain, the current profitability of a property has an average of 9.8%. This profitability is divided by the income obtained from the rental and the revaluation of the property. The figure is 1.6% higher compared to 2016.

This rise in profitability is due to the increase in the cost of houses/flats and the leasing boom. More and more buyers are opting to buy a house as a business, waiting for it to be revalued or to pay over 4-5% in the rental market.

Now is a good time to buy, whether it´s for long-term or a holiday rental since both have proven to give a return, which with the current low-interest rates, cannot be seen in any financial products. Investor clients are increasing, looking to purchase a home to achieve an economic return”, says Pedro Heredia, lawyer and partner of the law firm Pellicer & Heredia.

In Alicante, the development of new real estate business models has increased the property performance, generated by both, the new short-term rental platforms (Airbnb) and the traditional seasonal or long-term rentals. “In Alicante alone, there is a shortfall of ten thousand rooms per year, which justifies this growing supply, due to the excellent demand in the capital of the Costa Blanca. This model is extrapolated in turn to the whole coast of Alicante (COSTA BLANCA), where the investments designed to purchase a property is growing”, according to Rafael Ballesta, an agent of CITY SEA INTERNATIONAL.

At Pellicer & Heredia we recommend professional advice from a lawyer prior to purchasing your property, as well as in tax planning.

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