Investing into Spanish real estate is still the best option in 2019 that will get you a high yield according to the latest forecasts. The real question is which areas in Spain are more interesting for real estate investment? We have asked the sector experts and here is what they said.
High return with low risk
The current low profitability of other investment choices make real estate purchase an attractive option for those who want to increase their capital. “Right now, investments in bonds, mutual funds or deposits are minimal. Investing into equity implies a high risk, and with the existing forecasts for the United States economy, the declining American Stock Exchange, the risk is even higher. Therefore, the best existing combination of high return with low risk is offered by the housing sector,” says Gonzalo Bernardos, economist and director of the Master’s Degree in Consulting, Management and Real Estate Promotion at the University of Barcelona. “Both the rental ROI and the price increase can be as close to 15% in 2019, which is not bad at all.”
Daniel Cuervo, the general secretary of the Association of Builders and Developers of Spain (APCEspaña), agrees: “We are still waiting for yields in property investments both in property purchases and property rentals, although the expected yields are more moderate yet still higher than in other assets including public debt”.
The busiest areas in Spain
“Madrid, Barcelona and other main tourist destinations will continue to stand at the top of the list in tourist activity, prices and profitability,” says Beatriz Toribio, director of Studies and Public Affairs of Fotocasa. “These cities will also notice an economic slowdown and, along with it, a more moderate growth in real estate activity, but will continue to offer low risk and high returns.”
Big cities and their outskirts
Although high real estate activity is expected in Madrid and Barcelona, in some areas the margin of profitability may have reached the ceiling already. “The premium areas of the big cities, especially in the case of Madrid, are reaching their peak and, therefore, their profitability too,” says María José Corrales, president of the real estate company vivienda2 and promoter of the employer´s federation of Madrid FADEI. “Right now, the profitability rate in the center of Madrid is lower than in the surrounding areas. After a crisis, prices rise first in the center, where supply is scarcer. Right now, the difference in profitability between the neighborhood of Salamanca or Castellana and Vallecas, Caramanchel or even further away from the center makes it more interesting to invest in the periphery, where a yield of 7 or 8% is being reached, which has never been seen before. The scenario is certainly very interesting. ”
Yet in order to obtain high profitability, “I would not invest in the center of Madrid or in most of Barcelona. In Catalonia I would buy in cities such as Mollet, Molins de Rei or Mataró; in Madrid I would choose Leganés or Móstoles, which are cities in the southern part “, adds Gonzalo Bernardos.
Anyway, says Corrales, much of this decision will depend on the personality of the investor: “Some people always prefer central areas, which now offer lower yield, because they rely on a greater revaluation of the square meter price in the long term in those neighborhoods. Other investors seek the best existing yield. ”
Beyond Madrid and Barcelona
Madrid and Barcelona have been leaders in the recovery of real estate prices for some years now, but there are other cities that, according to experts, have an interesting potential for further growth. “There are many opportunities in Alicante, Zaragoza or Murcia, or any other city that has a population between 300,000 and 700,000 inhabitants,” says Bernardos. Daniel Cuervo adds Valencia and Sevilla to the list.
Investing on the coast
The other great option to invest in housing on which most of the professionals of the sector agree are the coastal areas. Above all, the Mediterranean coast: the region of Murcia, the Balearic Islands, Malaga, Catalonia and some areas of the Valencian Community are the most repeated investment suggestions.