Landlords and Pensioners Are Main Investors in Cheap Property in Barcelona

With the current financial situation in Spain as it is now, with interest rates close to 0% and stock market shares falling, this precise moment has never been so enticing to new investors on the property market.

And this is what’s happening all over Spain, but particularly in the area of Barcelona and its surroundings.

A new type of property investor has come onto the scene and is snapping up cheap properties with the intention of renting or just waiting and selling at a profit.

And, unexpectedly, the new type of buyer has moderate savings (around 120,000 euro) and is either already retired, or close to being so.

According to a recent study carried out by Tecnocasa and the Pompeu Fabra University, one out of every four properties sold is to an investor (24.65%). Amongst these, 26.7% are over the age of 55, and 18.97% are already of pensionable age.

This is a fairly uncommon situation as those in retirement usually hang on to their savings and prefer to keep them in the bank. However, with large sums of money not earning any interest, they are now looking for other options.

These are also people that know the market and the area where they opt to purchase a property, and therefore know what property prices are like now and how they were before the crisis.

The type of property that this mature investor is looking for is generally small, with two bedrooms, without a lift, and which doesn’t need much further investment to do up or reform. This is so that once purchased, the property can quickly be offered out to rent. They are mainly properties that are overlooked as a potential main family home.

There are many districts within the L’Hospitalet de Llobregat area where it is possible to obtain a property for less than 120,000 euro. In other cities, for example like Zaragoza, the same type of property would fetch around 70,000 – 80,000 euro.

While larger investors are still hesitant about investing in property with the intention to rent due to the legalities of evicting a tenant that hasn’t paid their rent for some time, the smaller, private investor is less at risk as he has the opportunity to meet the tenant before renting out the apartment and forming an opinion as to whether he is likely to default or not.

And the fact that there is such demand in the Barcelona area for rented property means that many with money to spare cannot pass up on the opportunity to make a profit from their cash.

In fact, an average of 34% of people in the Barcelona region are looking to rent a property, and this figure rises to 48% in L’Hospitalet and 44% in Valencia.

Profitability on rentals is also high in these areas with 6% profit made on a rental property investment in Barcelona and 7.7% in Madrid.

For those that require a mortgage for their investment, the amount required to borrow from the banks has been drastically reduced by as much as two thirds since before the crisis. House prices have fallen 55% since then on average and interest rates are the lowest they have ever been.

Source: www.lavanguardia.com