History of 100 Cities: Where Is It More Profitable to Rent Housing, and Where to Buy?
History of 100 Cities: Where Is It More Profitable to Rent Housing, and Where to Buy?
Renting is more profitable than buying in only eleven cities in Spain.
In most major municipalities of Spain, buying housing pays off better, and only in eleven cities does renting prove to be the optimal solution. This is the conclusion of a study conducted by UVE Valoraciones, which analyzed 107 Spanish cities.
Where in Spain Is It More Profitable to Buy Real Estate, and Where Is It Better to Rent?
Municipalities where renting is more profitable than buying: San Sebastián, Getxo, Sant Cugat del Vallès, Marbella, Palma de Mallorca, Alcobendas, Majadahonda, Pozuelo de Alarcón, Barcelona, La Coruña, and Santiago de Compostela.
Cities where buying is the priority option: Talavera de la Reina, Murcia, Tarragona, Lleida, El Ejido, Chiclana, Reus, Manresa, Algeciras, and Huelva.
In a number of municipalities, the profitability of buying and renting is approximately the same. These include, for example, Fuengirola, Orihuela, Rivas-Vaciamadrid, Madrid, Cádiz, Estepona, Ourense, Bilbao, Pamplona, Pontevedra, Girona, Vitoria, Mijas, Vélez-Málaga, Torrevieja, Benidorm, and Las Rozas.
The analysis was conducted based on calculating mortgage payments for a loan of 80% of the offer value, with a term of 24.58 years and a rate of 1.52%, taking into account average values for June published by the Spanish Mortgage Association, and sale and rental prices from the Idealista portal.
Based on this data, mortgage payments and rental fees per square meter were calculated. The percentage that mortgage payments constitute of rental fees was also assessed. If this share exceeds 85%, it is a fairly reliable indicator that renting is the best choice in that municipality.
With a value from 75% to 85%, the decision should be made individually, and with an indicator below 75%, buying is almost always preferable to renting.
Rapid Growth in Rental Prices
As explained at UVE, the sharp reduction in rental supply since June 2021 in the most populated cities foreshadows a significant increase in rental rates. This becomes a serious obstacle for young people wanting to start independent living, since for a first purchase it is necessary to have sufficient savings to cover the portion not financed by banks.
The shortage of rental supply may lead to many cities (Barcelona, Madrid, Bilbao, Getxo, Sant Cugat, Alcobendas, Majadahonda, Pozuelo, Marbella, and Las Rozas) seeing the current advisability of renting quickly replaced by the advantage of buying. If this happens, extremely few cities will remain in Spain where renting will be more profitable.