From the Beach to the Village: Where to Buy a Second Home and Make a Profit of Up to 10% | Financial Markets

The hot days are coming, and with them the desire to buy a house by the sea every summer returns. However, in recent years, finding a seaside apartment for less than 140,000 euros has become increasingly difficult, if not impossible. The rush to buy housing (especially in these areas), coupled with a shortage of real estate and a shortage of land for construction, has left those who want it almost no options…

The hot weather is coming, and with it the desire to buy a house by the sea every summer. However, in recent years, finding a seaside apartment for under €140,000 has become increasingly difficult, if not impossible. The high demand for housing (especially in these areas), coupled with a shortage of real estate and a lack of land for construction, has left those wishing to buy a first or second home in the country’s coastal areas at a price that is almost impossible to afford. Nevertheless, there are options if interested parties look at municipalities located further away from the main coastal urban centres, or choose houses that need renovation to make them habitable, or even decide to swap the seaside scenery for a home in the countryside. In addition, at current prices, the return on buying a second home as an investment can exceed 10%.

In the first quarter of this year, the price of housing in coastal municipalities, taking into account first and second homes, rose by 5.7% year-on-year, to €1,740 per square metre, compared with an average increase of 3.3% for housing in Spain. If only holiday homes are taken into account, the price increase was slightly lower: 3.9% year-on-year, to €2,650 per square metre, according to the latest statistical analysis by Tinsa. This same entity divides the Spanish coast into 51 zones. In 54% of them, the price of a second home is higher than the first, ranging from 5% to 300%. The traces of the few remaining transactions have thus been erased, especially those located on the seafront. “You can find better prices if you don’t mind driving a few minutes to more remote areas,” explains Alfredo Milla, director of the Sonneil real estate agency.

Milla points to the regions of Almería, Costa Cálida (Murcia) or even the southern Costa Blanca (Alicante) as potential places to find coastal housing at more affordable prices. Although yes, most of them are marked as resale, “because it is currently impossible to build new apartments at similar prices to those already built”. Ernesto Ferrer-Bonsoms, business director of Solvia, expands on this map and points out that there are also very good opportunities in Benicarló (Castellón), El Ejido (Almería) or Antequera (Málaga). The average price per square metre of the latter options is around €1,090, while the average price for the whole of Spain, according to Statista, is €1,865.

María Matos, director of research at Fotocasa, points out several areas where the price could be slightly lower or around 100,000 euros, such as the areas of Ferrol (La Coruña) and Burriana (Valencian Community). However, it also specifies that the bulk of the apartments that can be offered cost between 120,000 and 140,000 euros, with an average area of ​​80 square meters. In this price range, on the map of the Spanish coasts, you can find options in areas such as Mazarrón (Murcia), Oliva (Valencia), Tortosa (Tarragona) and Algeciras (Cádiz). Although he warns that 90% of these houses need to be renovated, which could increase the price to 60,000 euros, since, according to Matos, most of them are properties that are more than two decades old.

The solution may be to give up life by the sea or even choose a rural area.

The rise in prices reflects the new reality of the Spanish stock market, which is rising year after year due to growing demand for housing in the country and a lack of supply in response. “Demand that is growing in the Mediterranean arc and the archipelagos due to the strength of international buyers with high levels of equity,” explains Francisco Iñareta, spokesman for the Idealista buying and selling portal. Even the constant increase in interest rates – and the prices at which large banks lend – which have increased the amount of mortgages in recent years, have not been able to stop the hunger for housing in Spain. “Now, with the recent rate cuts by the European Central Bank, it is possible that the pool of demand that was withdrawn due to the increase in the cost of financing could be activated,” adds Iñareta, “which will put more pressure on markets that are already under stress.”

The problem of rising prices is also exacerbated by the lack of new building permits, which are lagging far behind national demand. The National Statistics Institute estimates that the sector will need to respond by around 180,000 homes this year to cover the annual housing supply. However, in 2023, construction of 98,040 properties has only just begun, meaning that around 80,000 homes remain to be built. Lengthy bureaucratic processes, coupled with a reluctance to invest in new construction and limited funding for local developers, are holding back the expansion of the fleet and exacerbating Spain’s huge housing problem, which is becoming chronic in beach areas.

According to Cristina Arias, director of research at Tinsa, in 2023 the number of residence visas in coastal municipalities fell by 22.9%, leading to a reduction in new construction on the coast from 30% to 25%. stock the useful energy inherited from the bubble has already been absorbed, which exacerbates the problem of shortage of supply and puts upward pressure on prices. “Although coastal municipalities are expanding inland, the beach area will always be in demand due to its location and good climate,” explains Milla.

Foreign investment is increasing

The end of the pandemic has not only revived demand from domestic buyers, but also increased the appetite of foreign buyers. Experts agree that the quality of life on the peninsula and the good climate in some areas of Spain are conditions that attract the interest of foreign investors. Although some, such as Ferrer-Bonsoms, also note that the high yields of specific regions are what is making more and more foreign buyers look to Spain when investing in real estate.

Data from the College of Registrars shows that in the first quarter of 2024, the percentage of home purchases by foreigners was 14.21%. Although this figure is lower than at the end of 2021, it remains in the highest range of the historical series, above 12% compared to the first quarter of 2020. “The high performance of real estate or the role of tourism in our country is causing foreign demand for luxury to focus its interest on residential parks and even on individual assets such as hotels or large retail such as shopping centers,” adds Ferrer-Bonsoms.

Profitability soars

Matos explains that over the last five years, the profitability of the rental property sector has increased significantly. If before Covid it was at 4.8%, now it is close to 7%, a figure similar to that provided by Idealista, which estimates the gross profitability of housing in Spain at 7.5% in June of this year. Although the data varies depending on the region, Fotocasa states that the municipalities where buying a house to rent is the most profitable are Mazarrón (Murcia) with an annual yield of 11.37%, Gandía (Valencia) with 10.81% and Laredo (Cantabria) with an annual yield of 9.62%. Lázaro Cubero, director of analysis at Tecnocasa, adds that in Alicante you can also get the most out of your property rentals, especially since prices start at a very low amount and that “you can also play with the contract during the holiday season”.

On the other hand, rental options are also far from the reach of most pockets: according to a study by Tecnitasa, a week in coastal areas this year costs 9.95% more than last year, which means spending an average of 1,160 euros. However, the offer on the seaside is very wide: from 3,300 euros per week in Porto Colom (Balearic Islands) to 500 euros in Moncófar or Vinaròs, in Castellón.

the nature of appetite

Opportunities can be found not only in areas near the sea, but also in the interior of the peninsula. Carmelo Antón, director of Rústicos Singulares, a real estate agency specializing in housing in such areas, notes that interest in buying a home in areas surrounded by nature has also increased sharply since the end of the pandemic and that this depends on the type of environment. Prices fluctuate quite slightly, although it does indicate that, compared to properties in coastal areas, more housing is available in rural areas.

To find something for less than €100,000, Anton points out, you need to look in the south of the peninsula. He explains that in the areas most affected by the general rise in temperatures, prices are lower. As an example, the businessman cites rural houses in La Sagra (Toledo), Ciudad Real and Badajoz. “In some of these places, you can find apartments for €50,000, but you have to keep in mind that these are dry places and there is no beautiful nature.” If the price range extends to €120,000, there are offers in the interior of Galicia, in Palencia or Zamora. Anton also explains that the profile of buyers is people who have already paid for their first home and are looking for a place to spend the hottest months. “Covid has created an unprecedented desire for nature,” he emphasizes.

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