With the cost of living soaring in the UK, and temperatures going the other way, many people are looking to warmer climes to help them get through the winter. As well as those booking their holidays and thinking of relocating permanently, others see potential investment opportunities.
Spain is one country that appeals to people in terms of investing in property. It’s a western EU country, which means cultural ties are stronger, and administration in the country is a little easier to get around. There is also the fantastic weather and lifestyle to consider. This is important, as even though people may not be planning to live in their new property initially, they may want to spend holidays there, or potentially retire there later. Here we look at whether investment in property in Barcelona represents a sound investment in the current economic climate.
Bouncing back
Like many places, Barcelona and Spain were affected by the Covid pandemic. The market stagnated as few people were looking to move. Since October 2021 though, things have started to look a lot brighter. According to Idealista, property prices per square metre in Spain went up 5% between December 2022 and December 2021. They are currently not far from what they were before the crash of 2008. With Covid behind us, this trend looks set to continue.
Another positive trend is shown by the Banco de España, who calculate the average profit made from property (rentabilidad de vivienda). This was down to 5% in Covid-ridden 2020, but rose significantly in 2021 to 10%. Data from the first 3 quarters of 2022 suggests this upward curve will level out, but continue in 2022.
The same data shows that while yields from rental property are lower than those for sale, Catalonia (the autonomous community where Barcelona is located) is the most profitable area to rent out property. Given the high rental prices in Barcelona, where rental prices have grown considerably faster than in Madrid, this would make sense. A study by fotocasa shows rental profits in Catalonia at 6.6%: the highest region in Spain, and comfortably higher than the 5.7% national average.
Barcelona was highlighted by a Deloitte report as being one of the few cities in Europe to rank higher than it’s capital, and to more than double its country’s national average. Of all the European cities in the report, Barcelona ranked 10th highest for average rental prices per square metre, good news for property owners. With the city enclosed by mountains and the sea, the city has nowhere to expand to, so prices should stay high or go higher.
Continuing to attract new people
The increase in remote working has meant that more and more people are choosing to move cities, and experience a new way of life, even if only for a few months or years. This influx of new workers leads to higher demand for accommodation, which results in more investment in property.
It’s hard to imagine this changing anytime soon. Barcelona is known as one of Europe’s leading cities for business and startups. They host the EU’s annual startups summit, and the mobile world congress. Barcelona is also home to 7 “unicorn” companies (worth over $1 billion), including Glovo. The city infrastructure is well equipped to cope with this status, so this will likely continue, as will the record foreign investment that we are currently seeing, as reported by La Vanguardia.
A large part of this investment is in office space, as workers flock back to Barcelona after the pandemic. All of these workers need somewhere to live.
Low mortgage rates
Mortgage rates are high in many places around the world. Few have a worse situation than the UK, where governmental mishaps caused a raise so high that many are unable to pay. In Spain the rates are still relatively low: INE data shows the average rate at 2.11% for variable mortgages, and 2.7% for fixed. This is good news for buyers, and as the culture here is more rental based, shouldn’t affect the number of people choosing to rent long term.
Conclusion
Barcelona is one of the best cities to own property in. Depending on which area you choose, your risk/reward ratio will vary, but compared with other options it’s a great bet. It’s also a fantastic city to live in, investing in property will give you a great excuse to stay here for a few months as you check out your options, and if you do want to make the move permanent one day- you’ll already have a home.
