Invest in stock or buy to rent?

The highest gross returns are at 7%

Unlike what you might believe, if you are thinking of buying a home to rent it and obtain profitability, the best opportunities are not found in Madrid or Barcelona. Prices there have risen but also where they are closest to touching the ceiling.

Profitability grows towards the islands and the Mediterranean coast, like Las Palmas, Santa Cruz de Tenerife, Alicante, Castellón, Valencia, Murcia, Almería or Cádiz, according to coincide in pointing several studies of real estate portals.

property-v-shares

The good performance of the housing market, contrasts with the poor performance of the Spanish stock market, which so far this year has fallen 10.8%, compared to to the rises of 7.4% registered in 2017. All this has motivated investors to return to the real estate market. The purchase of housing is a better investment than financial markets, both due to the increase in the prices of the houses as of the rents.

Forecast is for the rental market to continue its good performance, although with a more moderate price growth, which tends towards stabilization.

Rentabilidad Alquiler

As we indicated in our previous post ‘Where to invest in a Spanish holiday rental’, the vacation rental market is the most active and offers the best returns. This seems to be one of the reasons for the better performance of returns on the Spanish coast. Although the purchase prices are higher than in the interior or in the north of Spain, the rental yields compensate.

graph

In general, any type of real estate asset has better expected returns than investment in the stock market. Commercial, offices and even parking assets offer better returns than the stock market. It must be added that there are substantive factors that favor the investment in real estate assets for rent in Spain.

EVERY TIME MORE SPANIARDS RENT A HOME TO LIVE

The culture of property is changing. In Spain, 77% of citizens live in a house owned, a percentage 12 points above the average of the European Union, according to Eurostat. However, the population living on rent is growing, especially among young people. According to a recent study, 69.5% of residents in Spain under the age of 35 live on a lease.

Three key factors:

  1. the greater precariousness, which makes it more difficult to emancipate oneself and access financing to acquire a home,
  2. the change in mentality among the younger population, who prefer to live in rent because it means less ties,
  3. and globalization, which has triggered geographical labor mobility.

All this makes the Spanish rental market more and more interesting as an investment alternative.

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