Housing in Spain offers an interesting investment opportunity. The housing market in Spain offers positive dynamics and a promising future, although not without risks. My thesis is that the positive elements more than outweigh the risks and therefore I consider housing investment in Spain as an asset class that can give a healthy return. Of course, it is not possible to generalize, there are many markets, and the characteristics of each one of them are very different, and therefore not in all places and types of product it would be profitable to invest. Therefore, it is necessary to select the market whose risk/return profile best suits our investor profile, analyse the keys to the supply and demand of rentals in the area, as well as other specific segment drivers.

My positive view is supported by the solid fundamentals of the sector, with a stable unemployment rate and interest rates on an apparent downward trend. In addition, the market dynamics themselves are positive. Over the last few years, demand for the new housing segment has been significantly higher than supply, which is especially conditioned by the lack of supply of qualified land. Likewise, the attractiveness of our country as a holiday destination and the ultimate destination for capital investment from outside the European Union has increased significantly, with the result that this new demand comes on top of the already solid domestic demand.

Apart from the profitability analysis, I believe that owning a house is desirable from the perspective of generating long-term savings and retirement security. Little is said about how the future purchasing power of pensions may affect people’s future prospects. The current imbalance in the social security funding which results in annual deficits, in a pure pay-as-you-go system, suggests that future pension purchasing power may be significantly lower than that of current pensioners. Which in turn suggests that owning a home at retirement age will provide security, in case the pension is not enough to pay rent, or has to be used mostly to pay rent.

This opinion contrasts with the change in the life philosophy of the younger generations who are of first-time homebuyer age. The trend towards enjoying experiences in the short term versus the scenario of saving for the future, with investment for the long term in mind, clashes with our view. In my opinion, this is a passing trend, conditioned by the uncertainty about the future of young people, perhaps significantly greater than in previous generations. Added to this are wages below their expectations, as well as a lack of clear benchmarks, especially since it has been confirmed that housing prices do not always rise, and sometimes fall, in response to imbalances.

The young segment of the population is currently showing a preference for renting versus buying a house, which provides an additional driver to justify investing in housing. Moreover, the upward trend in rental housing prices confirms that the Housing Access Law, which came into force a year ago, has not succeeded in freezing the price of rents, as expected. 

Additional conjunctural trends for rental housing demand include divorces, with the consequent temporary need for housing or the creation of single parent homes, geographic mobility of workers, student housing, seasonal housing for retirees, etc.

Vacation or temporary rentals, such as Airbnb, offer another reason to justify the investment in rental housing. It is worth remembering that Spain has positioned itself in recent years as the second country in the world that receives the most tourists, after France, with more than 85 million tourists.

This trend is very likely to continue to rise, both because of the attractiveness of the “sun and beach” segment, Spain is already considered the Florida of Europe, and because of the growing attractiveness of city tourism (Madrid, Barcelona, Seville, Valencia, Bilbao, San Sebastian), as evidenced by the significant hotel investment of institutional investors or REITs such as Millennium Hospitality.

There are several options for an investor to invest in housing:
  • Direct investment, selecting a property based on its location, characteristics, price, rental potential and future revaluation, etc.
  • Investing in a rental housing REIT (Inversa Prime, Testa Residencial, Vivenio).
  • Investing in a listed residential property developer: Aedas, Metrovacesa, Neinor Homes.
  • Investing in a sector investment fund focused on real estate and residential development.

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