Which are the Best Cities in Spain for Real Estate Investment?

The Spanish real estate sector presents a unique opportunity for investors worldwide.  The loss in purchasing power of Spanish citizens, owed to the difficulties in access to credit, allows foreign nationals to benefit from the advantages that the sector offers (including decline in prices up to 40% in some areas).  At the end of the first half of 2013, foreign nationals spent 2,834 million Euros on properties, which amount to the maximum investment of the last nine years.

According to a study by the international consulting firm CBRE in 2013 (Real Estate Investor Intentions Survey), Spain ranks as the fourth European country with the greatest advantages of investment.  This statistic puts Spain ahead of countries like France, the Netherlands, and Italy, surpassing the result of 2012.  The study included the participation of 360 international investors, and it ranked the best cities for investment putting Madrid in ninth place and Barcelona following closely in 14th place.

Spain is one of the few countries that can boast of having two cities among the most valued by investors.  But which of these two cities offer a greater advantage when investing?

In the first half of the year, the Community of Madrid attracted 52% of all foreign investments, while Catalonia registered at 24% (Source:  the Investment Register of the Ministry of Economy).  While it is true that most foreign nationals opt to invest in Madrid, this does not necessarily mean that the sole reason is due to profitability.

According to the 2013 CBRE study, Madrid registered a return of 4.2% while the average return in Barcelona was 4.1%.  In both cases, the return rate exceeds other big cities like Moscow (3.6 %), Hong Kong (3.1%), or Monaco (1.6 %).  However, there are different variables that influence the profitability.  These variables range from the location of the investment to the number of bedrooms of the property.  To calculate the profitability of a specific property, we recommend a preliminary report including all variables.

While real estate sales prices continue to fall, rental prices are stable.  This is because of the current economic situation that Spain faces.  For many Spanish citizens, the possibility to buy property decreases, and they are forced to rent.  Therefore, many foreign nationals find in Spain the perfect investment within the practice known as buy to rent.

If the investor’s purpose is to conduct the practice buy to rent and the acquisition of property is made only by way of investment, Madrid offers great advantages because it is the capital of Spain and continues to be home to large companies and businesses.  In considering Madrid for property investment, foreign investors stress its advantages compared to Barcelona such as the labor costs or language levels.

However, Barcelona wins points with respect to the quality of life it offers.  This is a product of its wonderful views of the Mediterranean Sea, its location only a few kilometers from the Pyrenees, and its cosmopolitan and diverse spirit.

In general, we could speak at length about the best choice for investment between Madrid and Barcelona on the purpose of the property.  For those investors who plan to reside in Spain, it is noteworthy that both cities have an excellent network of universities and public and private schools.  In Spain, there exist over 70 universities offering a wide range of courses validated in all 28 EU member countries. More and more students are coming to Spain to pursue their studies (more  than 70,000 students in 2012).  Many of these students have a great interest in learning Spanish because, after Chinese, it is the second most spoken language in the world (by about 400 million people). Moreover, the entire Spanish territory has excellent public health services.

For all of these reasons, foreign nationals can be sure that investing in Spain at this time is a good choice, regardless of the selected city.

Marí­a Valencia

This article is not considered as legal advice