The economic downturn has led to a significant rise in the number of people renting a home in Spain for the long term with strong demand from nationals and foreign residents, new data shows.
Overall the Spanish rental sector has doubled in the last five years, according to the data from the country’s National Statistics Institute and figures also shows that yields are up to 7.6% for long term lets.
Indeed, improving yields has prompted many investors to turn to Spain as the next buy to let destination of choice with data from Idealista showing that yields have increased from 4.7% a year ago, to 5.3% currently.
Popular tourist areas, such as Las Palmas de Gran Canaria offered returns of up to 6%. A modern, one bedroom apartment with sea view can be rented out for €700 per month, while a spacious three bedroom townhouse with sweeping views of the bay and port costs from as little as €145,000.
Nor is it just tourist areas that offer strong returns. The highest yielding area, according to the Idealista figures, is the Catalonian regional capital of Lleida, where returns have reached 7.6%. A two bedroom, three bathroom, high spec apartment with balcony there can be picked up for €207,800.
The news that Spanish rents rose for the first time in seven years in the first quarter of 2015 is further attracting the interest of buy to let investors with their eye on solid returns. According to Fotocasa, the average price of rental accommodation rose by 2.8% during the first quarter of this year, to €6.96 per square metre per month.
Added to all of this is the surge in demand from tenants, with the size of the rental sector more than doubling from 7% just over five years ago to 16.6% in 2014, according to figures from the National Statistics Institute’s Continuous Household Survey.
‘The past few years have seen a significant increase in the number of people in Spain looking to rent listing on a long term basis,’ said Martin Dell, Director of Kyero.com, the portal which lists listing sales, holiday rentals and long-term rentals.
He added that Kyero’s long term rentals site has experienced strong demand, from Spanish nationals and from foreign residents, while the firm’s sales site has received interest from investors looking to build up buy to let portfolios while listing prices remain low.
While more than half of rented homes house foreign tenants, Spanish nationals are increasingly looking to rent due to the flexibility that doing so provides. Following nearly a decade of high unemployment, the Profile of the Tenant in 2014 study has revealed that labour mobility is the main reason that many opt to rent a listing rather than purchase one.
The same study provides an interesting insight into the average tenant, who is aged between 35 and 44 years old, married and with a university education. They are professional tenants with families. Some 22% are looking to rent due to the freedom that this provides for employment purposes, 16% say it is for the flexibility to rent in a city other than where they ultimately intend to settle and 15% see it as a chance to live in a home that they could not afford to buy.
According to Dell, with rental yields in the UK and other popular buy to let destinations beginning to be squeezed due to rising listing prices, the combination of healthy yields, soaring demand and low purchase prices might just see Spain emerge as Europe’s next buy to let hotspot.
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Source: Property News Spain