Spain is looking increasingly attractive for buy-to-let investors from all over Europe with a combination of healthy yields, soaring demand and low purchase prices, experts say.
Rental yields in the UK and other popular buy-to-let destinations are beginning to be squeezed due to rising property prices, while in Spain the rental market has doubled in size over the past five years and yields of up to 7.6% available for long-term lets.
In Spain, as in many other countries, home ownership has historically been seen as preferable to renting a property, due to the security and investment that ownership provides. However, the economic events of the past decade have brought about a shift in the Spanish long-term rentals market, with increasing numbers of people opting to rent either as a lifestyle choice or due to an inability to get onto the housing ladder, according to Kyero.com, a portal which lists property sales, holiday rentals and long-term rentals in Spain.
The promise of improving yields has prompted many investors to turn to Spain as the next buy-to-let destination of choice. Figures from Spanish property services portal Idealista reveal that yields have increased from 4.7 per cent a year ago, to 5.3 per cent currently. Popular tourist areas, such as Las Palmas de Gran Canaria offered returns of up to 6 per cent.
However, not just toursit areas offer good returns, as the highest yields, Idealista says, can be found in the Catalonian regional capital of Lleida, where returns have reached 7.6 per cent.
Furthermore, Spanish rents rose for the first time in seven years in Q1 2015 and this is a further driver for demand.
More than half of rented homes are held by foreign tenants, although more Spanish nationals are also entering the market in recent years. According to the Profile of the Tenant in 2014 study, the average tenant is aged between 35 to 44 years, married and with a university education. They are professional tenants with families, looking to rent due to the freedom that this provides for employment purposes (22 per cent), the ability to rent in a city other than where they ultimately intend to settle (16 per cent) and the possibility of accessing homes that they could not afford to buy (15 per cent).
This last point is particularly interesting to buy-to-let investors, as it emphasises the increasing focus of tenants on high-spec properties with luxury features. Whether it is proximity to a beach, a stunning roof terrace or fabulous sea views, a property with something extra special will certainly attract heightened demand from potential tenants.
