In 2022, property in Spain remains near the top of the list of the most popular investment choices. Construction, the buying and selling of residential and commercial property and of land suitable for residential and/or commercial development, as well as long-term and short-term letting, are in steady demand among Spanish and foreign investors.
Property in Spain in 2022 as a safe-haven asset
Property in Spain in 2022 has been and remains a reliable asset. Even at the height of a crisis, the property market cannot collapse the way stock markets do. That is why demand for property in Spain, which dipped slightly in 2020 because of lockdown and closed borders, fully recovered in 2021 and continues to grow rapidly in 2022.
According to independent experts and leading Spanish commercial banks, prices in Spain’s big cities and popular resorts can be expected to rise by 2-6% this year. And such prospects only spur investors to make decisions quickly.
One of the leading portals, pisos.com, noted a rapid rise in demand for Spanish property from foreign investors in 2021. Foreigners, both before and now, go for more expensive, higher-quality property.
If we compare low-risk investments, the property sector, with its steady growth in price per square metre and yields of 5-7% a year, clearly outperforms government bonds (under 0.4%) and long-term bank deposits (under 0.5%).
Property in Spain has been and remains a safe-haven asset. Low mortgage interest rates add to its appeal.
Property investment options in Spain in 2022
Many small investors aim for passive income, buying residential property and betting on long-term lets. Demand for this kind of letting far exceeds supply, above all in the big cities. Letting a flat is much quicker than selling it.
Tax breaks also add to the appeal of this kind of business: resident owners are entitled to a 60% reduction in the tax on income from letting residential property.
Two- and three-bedroom flats are in the greatest demand. According to the statistics, small flats (studios, one-bedroom apartments) are in high demand, but tenants also change more often in them, which by no means suits every owner. Letting 2- and 3-bedroom flats is more stable, and tenants change less often. Flats with 4 or more bedrooms are often rented jointly by students, so tenants change constantly in them too.
The most profitable properties are those that combine as many important features as possible: the quality of the home itself, closeness to public transport stops, a location in areas with good amenities, near business centres, administrative and commercial districts, universities and so on. A parking space is an extra advantage.
Over the last three years, large investors have been actively developing built to rent: the construction of residential developments to let. This covers both standard housing and student housing. Tenants are often offered a “rent to own” option.
A special case of residential developments is residences for older people, which, in addition to the usual services of a residential community, offer special services: medical staff on duty around the clock, homes fitted with emergency call buttons, physiotherapy rooms, fitness classes and so on. Many well-off pensioners seek to buy a home in such residences, which have nothing in common with care homes but at the same time guarantee round-the-clock medical supervision.
Buying to resell also remains in demand. The Spanish property portal fotocasa.com speaks of 15-20% returns: a little cosmetic renovation can transform a home and significantly increase its appeal and, as a result, its value. This option is chosen by investors who count on a short investment cycle and a faster turnover of funds.
Property investment yields in Spain in 2022 by region
If we talk about the cities of greatest interest to investors in terms of demand for property, Madrid and Barcelona take the first two places. They are followed by Tarragona and Málaga, and then by Lleida, Toledo and Valencia. Here demand traditionally exceeds supply, and good properties, both for sale on the resale market and to rent, go within days.
At the same time, if we look at yields, the picture is as follows (fotocasa.com data for 2021):
- Region of Murcia (7.5%),
- Navarre (7.3%),
- Valencian Community (7.3%),
- Catalonia (6.6%),
- Canary Islands (6.5%),
- Aragon (6.4%),
- Castilla-La Mancha (6.3%),
- Asturias (6.2%),
- Cantabria (6.1%),
- Castilla y León (6.1%),
- Andalusia (6.0%),
- La Rioja (6.0%),
- Extremadura (5.8%),
- Basque Country (5.5%),
- Galicia (5.5%),
- Madrid (5.2%),
- Balearic Islands (5.0%).
Apart from Navarre, the highest figures are shown by the warmest regions of the Mediterranean coast, which are densely built up along the whole coastline and are in huge demand both on the domestic market and among foreign investors. On average across Spain, the yield on residential property in 2021 was 6.5%.
Nationwide, the most profitable urban districts in 2021 for buying property to let were two districts of Alicante, Carolinas Bajas (8%) and Pla de Bon Repós (7.8%), two districts of Valencia, Rascanya (8.3%) and L’Olivereta (8.1%), and a district of Granada, Almanjáyar (7.9%). The most profitable district in Madrid was Numancia (7.6%), while in Barcelona first place was shared by Provençals del Poblenou and El Raval (5.7%).
