Real estate in Barcelona: Why is it profitable?

Real estate in Barcelona: Why is it profitable?

15 March, 2017 in Real estate investment, Real Estate Trends, Why Barcelona?

Barcelona has one of the world’s most booming real estate sectors at the moment making it one of the most attractive markets to invest in.

In PwC’s most recent report, “Emerging Trends in Real Estate” that outlines the new developments that the European real estate market will see in 2017, it points out that Barcelona ranks number 15 in the list of European property markets with the best prospects for investment in 2017. Average rents and capital values of properties are expected to increase in 2017 according to the same report.

WHY IS PROPERTY INVESTMENT IN BARCELONA SO PROFITABLE RIGHT NOW?

Low interest rates

Interest rates on mortgages taken out have been decreasing since the 2008 crisis, meaning that the overall amount of loans being taken out has been increasing by 14.5% year-on-year (according to the National Institute of Statistics). Non-residents can obtain loans with 70% LTV at just 4% interest per annum. Spanish residents can take out a loan with up to 80% LTV at just 1% interest per annum.

The decreasing trend of interest rates and consequent rise in the volume of loans taken out means that demand is steadily increasing, favouring the sales growth. It is predicted that this trend with continue throughout 2017, thus increasing the average prices of residential properties. This means that now is the ideal time to invest in property in Barcelona, with profitability at an all-time high.

Low prices and much potential for growthReal Estate Barcelona

The overall price of properties in Spain has decreased from €2,862 per square metre at its peak in 2007 to its lowest in 2015 of €1,619. In 2016 it started to recover and overall Spanish prices have edged up. Barcelona has seen a similar trend, however the market started to recover much earlier on mid-way through 2013 and is steadily increasing upwards. Prices of properties in Barcelona are still low but are forecasted to be continually increasing. With this trend, there is much room for potential growth in the market and so property investment right now in Barcelona is a very attractive option.

Whilst Barcelona is one of the most expensive markets in Spain, in comparison to other attractive investment cities the property prices are cheap. On average, they are over twice as cheap as in Munich and Paris and 3.5 times cheaper than London.

Real Estate Barcelona

Property demand exceeding supply

Real Estate Barcelona

The general trend is that the sales of properties have been increasing, (by 19% between just 2014 and 2015) but the majority of transactions have been for already existing properties, with the sales of newly built properties having decreased by 20% in the same time frame. The main reason for this is that there is currently a shortage of supply in the newly built property market.

The demand for newly built properties far exceed the supply at the moment – to meet the current demand, 7,900 properties would need to be built per annum. At the moment this number is at 2,000-3,000. That said, the number started projects is rapidly increasing – between 2015-2016 the number of new properties under construction has rose by a massive 87% to 1,400. Although there is a long a way to reach the 2007 level of 4,700 properties per annum, the pace has picked up dramatically and is only set to increase more.

To sum all this information up, the main trends in the Barcelona property market in 2016-17 will be as follows:

  • Prices of residential properties will grow by 7-18% per annum
  • As mortgage rate will remain low, sales and demand will continue to grow
  • The supply of newly built properties cannot meet the current demand – investor interest will shift to Added Value projects in the future.

Now is a good time to invest in Barcelona’s real estate as the trends at the moment are favorable to speculative investments with the aim of profiting from future price growth.

Take a look at our luxury properties for sale here.

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