Everything about real estate investment in Spain – acquiring the right property in the right area

Real estate investment in Spain – Buying a house in Spain may be the best investment of your life, but choosing the right house or apartment in the right area is essential. The Costa del Sol and the Costa Blanca, for example, have a stronger tourism than most other areas. But far from all areas on the coasts have a high occupancy. There are also many other aspects you should be aware of.

For example, did you know that there are strict restrictions on renting in areas such as Mallorca, Barcelona and the Canary Islands? There are also other laws and regulations governing leasing for most Spanish provinces that one must follow to not to risk costly fines.

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We will mention Nerja, east of Malaga, on the Costa del Sol many times in this article. There is a reason for that. Nerja has for some time been Spain’s most attractive city to invest in, and we have more real data from this city (as well as Torrevieja) than any other city in Spain – The reservation of private owned accommodations in Spain increased by one million in the first half of 2017, representing a 33% increase compared to the same period last year! Last year, for the first time, private rental housing surpassed the hotel industry in certain areas.

Keep in mind that the most lucrative area is the Costa del Sol, and that it is the most interesting for residential investors, due to the lack of new homes as a result of the long crisis. This is especially true in areas where there is still interesting land to build on (mainly in and around Malaga 2020 onwards). 

However, land prices are increasing rapidly, and for each new phase of each construction, prices are increasing. If you have a newly built home in 2019 or later, buy now, not later. According to a study by AEV, the Spanish valuation institute in the summer of 2019, substantial increases in house prices are expected from 2020. There are several different factors pointing to this, such as that more and more tenants want to own their own home. The last 2 years have seen relatively large price increases, but 2019 is expected to experience a relatively modest increase in prices.

Different types of opportunities for those who wish to invest in Spain.

During the end of the autumn 2019, our parent company Spanska Fastigheter have established a partnership with the Spanish international construction consultant/promoter Nuovit. Their specialty is to look for plots in attractive locations with an attractive price image and then boost construction prices without compromising quality or environmental thinking. Nuovit has developed projects with a market value of € 3361 million over the past 15 years. They have built all over Spain and South America. Their head office recently moved to Malaga because, like most major investors, they see the greatest future potential in and around Malaga. It is mainly the long-term increase in value that is interesting, but letting go of the right areas in Malaga is the strongest advance of all areas. The city of Malaga is also not dependent on strong tourism, as companies and lawyers / doctors, etc., are looking for housing to rent in the market. 6 years (until 2019), according to the Central Bank of Spain, rental prices have increased by 45 percent!

Thanks to our exclusive partnership with Nuovit mentioned above, and close cooperation with most builders, as well as with banks, investment networks, and now with the Crowdfunding service for small savers (see below), we offer a full range of opportunities for those wishing to invest in housing in the Spanish property market:

  • Would you like to enter with a maximum of approximately EUR 1 000- 10 000? Then invest in a participation in the Crowdfunding Co-Properties solution below. We know the market and make sure they offer the items that have the most potential.

  • Do you want to buy one or a couple of houses for rent? Our specialty is to find exactly these items and also offer a complete solution for the rental (including marketing on international portals, assistance with licenses, key management, cleaning and administration, etc.).

  • Do you want to buy a plot of land and build a project with 1-50 homes (including the construction of individual luxury villas)? Our experienced lawyer will help you find land and negotiate a good price. In collaboration with our architects, we help you design and define the project and make sure the project meets all the requirements for obtaining licenses, etc. We also put you in contact with the bank manager to obtain financing, as well as with the insurance companies to obtain guarantees.

Since the autumn of 2019, we have begun a collaboration with the exciting Swedish fintech company Co-properties (our function is to search for properties that we believe have the greatest potential to increase in value and good rental potential). Their business concept is to offer an investment opportunity for small savers by applying the crowdfunding concept to real estate investments in Spain. By dividing each property into smaller parts, one can, through their investment platform with smaller amounts, speculate on the specific development of a specific property along with others, while earning rental income on a continuous basis. In this way, the total purchase price is collected through their platform and, therefore, no mortgage loans are needed. Therefore, profit is not affected by interest payments and costly Spanish bank fees.

Our parent company Spanska Fastigheter operates in major parts throughout the country and works with most major banks, estates agencies, and also own Scandic Feel Rentals etc.. Therefore, we get figures from most of the different players in Spain, but no figure comes close to Nerja’s rentals figures. The relatively low prices combined with the high occupancy rate mean that Nerja has the highest ROI (return on investment).

It is difficult to say in advance which areas will become new “hot spots”, but the safest thing, as with everything else, is to study history

If you have a documented rental history, you are safer in your investment than 99% of all others. We are constantly looking for good areas to invest in, but here and now, and for a while, Nerja together with Málaga city is the best place to invest in Spain. However, keep in mind that there are no houses worth investing in for less than 100 000€ in the city, but for investors with lower budgets there are other options (such as Torrevieja on the Costa Blanca, which provide lower incomes but also cost a little less to buy) . However, really good investments generally cost more than 100 000€, regardless of where in Spain you are looking. Although the bank’s items are cheap, they are not found in good areas.

At Scandic Feel Rentals & Estates and Spanska Fastigheter, we focus on finding properties that are good investments, both short and long term. They must have a high occupancy rates. Spanska Fastigheter have analyzed the history of our own clients’ houses, our own rental operations and the statistics of our partners from the years before the crisis until now. It is clear that to make an investment as secure as possible, one must invest in a property located in areas with a rental history that remained strong even during the crisis years. Our goal is to make it as easy  as possible for our clients to successfully advertise and make a strong profit on their holiday homes.

That's why the potential rental income from a property is so important.

One mistake that many people who invest in real estate makes is that they only look at the development of potential value and neglect the amount that a property generates in income per year. Instead, they only speculate about the future value of the home. Warren Buffet, who became the richest man in the world through real estate investment once said: 

According to a customer research  conducted by Tripwell, 7 out of 10 Swedes rent their home abroad to cover costs. However, the right property in Spain can generate much more than just “covering costs” , it should be noted that in most areas of Spain, despite its great popularity, it is difficult to obtain a good occupancy rate . But with the right property in the right area (and the right marketing through third parties, or on the right portals on your own) you can make a very good real estate investment in Spain.

Spain is now considered to be the safest tourist destination in the world, and since many of those who chose Turkey, Greece or Thailand now choose to enjoy their vacation in Spain. Spain is now the second most popular tourist destination in the world (after France). In 2016, Spain had 75 million visitors, in 2017 there were 82 (!) Millions of foreign visitors. This was the fifth consecutive year that the record was broken. One big reason why the numbers are increasing so dramatically is that more and more people visit Spain every month of the year, not just in the high season. The most incredible thing is that it is believed that the roof is far from being reached.

Another trend is that international luxury tourists have opened their eyes for Costa del Sol. Costa Blanca tourism, for example, is also growing strongly, but low-budget tourism has so far prevailed in this part of Spain. The three largest regions for international tourism are Andalusia (mainly the Costa del Sol), Valencia and Catalonia. Then follows the Canary Islands and the Balearic Islands (with Mallorca at the forefront, however, which is collapsing rapidly, and TUI will reduce capacity there by 30% in 2019).

In 2016, building construction accounted for 10% of Spain’s GDP. In 2017, it grew significantly, investing €1 billion in new developments on Costa del Sol alone. It will probably never start building again at the same pace as it did in 2007, before the crisis. But clearly there are many construction projects underway, and it is speculated that within a few years they will be at a production rate of 400,000 newly built houses per year.

Prosperous Spanish tourism, good infrastructure and low prices for high-quality real estate have made Spain very attractive to international investors. But tourism and the quality of housing in Spain vary greatly by region, city and neighborhood. So let’s take a closer look at the different Spanish areas.

If you are interested in investing in real estate in Spain, you can contact us and one of our advisors will personally handle your case and be with you throughout the process. We have a great and experienced team of consultants and lawyers at your disposal.  

info@scandicfeelestates.com 

 

Original text written by Jan Nilsson – Marketing Director Spanska Fastigheter 

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