Build to rent has become a tendency among European investors and it is also increasingly popular in Spain. It is about investing in new housing and after renting it in order to make the investment profitable. Unlike property dealing, which has lately moderated in Spain, renting prices are on the rise, especially in the large cities. This circumstance has made investors put the renting business under the spotlight. It is estimated that in Madrid only, rental housing takes up nearly 20% of the property. This is not a very high figure compared with other European capitals. For instance, in Berlin rental housing makes up 85% of the property. However, we must point out that this increasing demand has not gone unnoticed among the investors. More and more private investors, especially foreign ones, have become aware that renting is good business. Thus, build to rent has started to become popular in Spain.

THE BUILD TO RENT PROFITABILITY

It is estimated that when an investor purchases or builds a building so as to rent it, the profitability can range from 5% to 6%. In Spain, most of the build to rent investors make deals in Madrid and Barcelona. However, little by little other cities are joining in. It is estimated that nearly 23% of Spanish people live in rented accommodation. In the last nine years this figure rose 3%, a fact that led to an important increase in prices. If we compare the current renting prices in Spain with one decade ago, the difference is conclusive: between 2007 and 2018 renting prices in Spain rose 20%. At present, in Spain there is very high demand for rental housing especially in Madrid and Barcelona where there is little offer. This situation has made more and more investors turn professional in the Spanish real estate market. In any case, it is only a residual percentage, 5%, compared with the 95% of private people who rent in Spain.

BEYOND THE M-30

In Madrid, the areas where the highest profitability regarding renting is attained, are in those located beyond the M-30. This is because property in the centre is very expensive and thus profitability is low in the short term. It is considered that purchasing property beyond the M-30 has practically zero risk for the investor. Therefore, the build to rent investors generally choose areas like Vallecas, Carabanchel or Villaverde. What tenants value most are good transport connections with the centre. Hence, these neighbourhoods are very appealing. Which is the main reason why build to rent has started to become popular in Spain? Most analysts agree on the fact that the main reason lies in the difficulty of purchasing new housing. Renting is very much in demand and this has led to making build to rent a great business opportunity.

Picture 02: manuel m.v.