1. In times of political and economic instability (war, stock market crash, global pandemic, bank runs, high inflation, etc.), gold and real estate are king as traditionally they act as safe havens where savers shelter their money to weather the storm.
2. Staves off inflation. At a time when central banks have (irresponsibly) printed money to no end, vastly increasing the monetary mass which in turn has led to inflation spiralling out of control worldwide, real estate offers by contrast a placid solace to deposit your life savings. Savings sitting idly at a bank are devoured by rising inflation, losing value every year.
3. Tangible asset. Real estate is a tangible asset that you can touch, feel, and see any time of the day. This acts in sharp contrast to ethereal investments, such as crypto currencies and other intangible assets, which are really never under your control, hard to understand, and even harder to monitor.
4. Security. The laws in Spain offer property owners a solid legal framework which protects and upholds their rights as behoves a modern European democracy. In several regions of Spain (i.e. Madrid, Andalusia, Galicia, etc.) inheritance tax and wealth tax have been suppressed. These regions have also slashed property transfer tax and stamp duty on buying property.
5. Capital growth. It’s no secret that real estate always appreciates in the long run. Unlike other volatile investments (such as stocks, bonds, and mutual funds) which undergo huge fluctuations, real estate offers a constant and gradual increase of value over time. Property prices in Spain have risen by 16% over the last five years (and even by two digits year-on-year in some sought-after areas, such as large cities (i.e. Madrid, over 40%) and coastal areas (i.e. Marbella, 40%). You really don’t need to invest in Bitcoin to strike it rich, just stick to the basics.
6. Generates passive income. Rental yields in Spain have soared by two digits over the span of three years. Spain is the world’s second tourist destination creating a huge pentup demand for holiday accommodation. Investing in property, and collecting the rent, is indeed a (very) profitable business in Spain. For long-term rentals, you can expect a net yield of 5% a year; for holiday accommodations it’s over 10%. They don’t call them ‘landed’ gentry for nothing!
7. Equity leverage. Investing in real estate allows you to leverage your equity over time. In plain English, this means that if you finance a property with an investment loan, the amount of money you borrow will eventually be less than the value of the property once it appreciates over time. After some years, you can refinance and use some of the additional equity to invest further in other properties. This strategy is ideal for investors who want to play it safe and adopt a long-term investment strategy, building up a healthy property portfolio over time.
8. Source of cash flow. Rented properties generate a constant revenue stream for their owners. Landlords may use the collected rent to pay overheads and other property maintenance expenses - including monthly mortgage repayments! In a nutshell, a wellchosen property pays for itself!
9. Generous tax deductions. Unbeknownst to most people, Spain offers lenient tax allowances which in effect reduce a landlord’s tax bill by 70%, or more (applies only to EU residents). You can offset all property maintenance expenses, including your lawyer’s fees (to calculate the rental tax) and mortgage interests! Once deducted, property offers great returns on investment.
10. Strong dollar vs. weak euro. This advantage is unique to those investors holding US Dollars. Due to the lack-lustre and reactive performance of the ECB, the US Dollar has strongly appreciated against the Euro over the last months creating unique buying opportunities. In plain English, never before has Spanish property been cheaper and more appealing to savvy US Dollars holders. Not to mention that buying property opens the door to a coveted Golden Visa, which allows unfettered access to the Schengen Area (27 countries). When you combine soaring rental yields and capital growth, you reach the conclusion that Spanish real estate is delivering a safe two-digit return year on year.
(As published 10.5.23 on "Idealista” under the "news” section).
Posted by: Dawn Nott on Friday 12th May 2023