The moderation of prices in the residential market contrasts with the dynamism that the holiday home market continues to display, which has risen by 6.3% in the last year, up to 2,550 euros per square meter, according to a recent report by the company Tinsa appraisal. A trend driven by international demand and the recovery of tourism since the pandemic. Prices rise on almost the entire Spanish coast, although profitability varies depending on the area and the characteristics of the home.
Acquiring an apartment to spend the summer on the coast costs an average of 35% more than a first residence. The most common price range is between 1,800 and 3,600 euros per square meter, although the most expensive area is the Balearic Islands, with an average value of 6,000 euros per square meter. They are followed by the province of Málaga (€3,400/m2), Guipúzcoa (€3,300/m2), Santa Cruz de Tenerife (€2,900/m2) and Girona and Vizcaya, with an average price in both cases of 2,800 euros per square meter.
Judging by the data, the effect of inflation and the tightening of financing conditions due to the rise in interest rates seem to have passed by this market. A phenomenon that is explained, they point out from Tinsa, by "the profile associated with the second home buyer", less vulnerable to these two variables.
However, the profitability of a holiday home depends not only on the purchase price, but also on the price at which it is possible to rent. In this sense, the areas with the highest rents are the Balearic Islands, Costa Brava and Costa del Garraf, in which the average rent for a home for a week in high season rises, respectively, to 2,121, 1,490 and 1,360 euros, according to a Study of the Pisos.com portal. On the contrary, Rías Baixas and Rías Altas, as well as the Costa de Almería, are the cheapest areas.
But managing to rent the property at a high price for only a couple of months a year will not be enough to make it profitable. In general, it must be leased for more than four months. "If you manage to rent for six months, it is very likely that the profitability will exceed 5%," explains Gonzalo Bernardos, professor of Economics at the University of Barcelona (UB), consultant and real estate adviser.
Therefore, the first criterion when purchasing a vacation home as an investment "is to choose a beach town with a climate that allows you to rent the home for at least half a year," and adds: "The community that best meets this requirement is the Canary Islands, especially Gran Canaria and Tenerife". It is followed by the province of Malaga -with tourist towns such as Estepona, Fuengirola and Marvella-, where the good weather makes it possible to find seasonal tenants for at least ten months a year. Other areas where there is a high probability of renting for at least six months are Valencian coastal towns such as Benidorm, Jávea, Altea, Calpe and Dénia.
One factor that reduces the profitability of the operation, warns Bernardos, is investing in an apartment located on the beach "because the price is very high." Therefore, it is better to opt for properties that are about 100 or 200 meters from the sea, near the center of the town and that, preferably, are part of an urbanization with facilities -swimming pools, sports courts and a children's play area-. "This is especially valued," he asserts, as well as the fact that the house has a large terrace, a garden area and that it is well maintained. And it will be more attractive to tourists the more emblematic the town in which it is located. If all these requirements are met, the return can reach 7%, although the most common is between 2.5% and 3.5%, since the property is usually only leased for a few months a year. .
Considering what are the successful characteristics of a vacation home, what type of investment could end up being a fiasco? For example, a property that, in order to get to the beach, requires crossing a highway, a train track or that it is even necessary to use the car to reach the sea or the center of the population. "It will not be profitable, because it will not be rented for even four months a year even if it is in Cambrils," says the real estate consultant.
According to the Pisos.com study, the profitability of rental housing on Spanish beaches has increased slightly in the last year, from 2.53% to 2.61%. The coast that brings the most benefits to owners, with an average return close to 4%, is the Balearic Islands, an enclave in which 20 years are needed to recover the investment, according to the portal's calculations. While, in general terms, the purchase of a flat on the coast is amortized in 31 years, assuming that it is enjoyed two weeks a year and is rented to a third party for at least eight weeks.
Although the owner will have to make a greater outlay if he decides to buy in an area with a large tourist influx, Ferran Font, director of Studies and spokesman for Pisos.com, assures that this type of investment "is very safe" because it increases the possibility of keep it busy for longer, especially in peak periods. However, he advises looking at the evolution of the purchase and rental market when opting for a home, since the profitability of the operation will increase if the purchase price stabilizes and the rental price rises more. The return will also be higher the more leverage the investor uses. In this sense, financial institutions do not usually finance more than 60% or 70% of the acquisition amount.
Finally, Ernesto Ferrer - Bonsoms, Solvia's Real Estate Business Director, highlights that "two homes in the same location, but on different streets, can have very different returns." In general terms, "increasing interest" stands out on the coasts of the Mediterranean, Alicante, the Canary Islands and the Costa del Sol, where a significant percentage of buyers of second homes are foreigners. A demand that is added, he comments, to the increase in Spanish residents who have been buying in this market since the pandemic. A trend that is driven by "relocations due to teleworking and the increase in rental prices".
The average weekly rent for a flat on the Spanish coast stands at an average of 796 euros, 6% more than a year ago, according to data handled by Pisos.com. Likewise, as a result of the approval of the new Housing Law, the portal estimates that the offer of vacation rentals has increased by 9%, a type of lease that is beyond the rent control established by the norm.
