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Increasing domestic demand for rental property boosts Spanish buy-to-let market, especially commercial areas and cities.

It’s become a well-known fact that the traditional ‘fly-to-let’ rental market in Spain is suffering from over saturation.

Coastal resorts are certainly as popular as ever, with Spain remaining one of the top holiday hotspots with British and European tourists, but when a situation of over supply hits the holiday property market it certainly makes it harder for investors to make money from homes they wish to earn rental income from.

However, the good news is there are some lesser-explored, more profitable pockets of the buy-to-let investment property market in Spain that previously were the well-kept secrets of professional and institutional investors only.

Now that real estate prices on average have adjusted and fallen across most of the Spanish market, it makes it a very positive time to explore these alternative buy-to-let approaches in Spain.

Mike Hamilton, sales director at Casas de Lorca and an expert on the Spanish investment property market, said: “The main investment approach that has seen larger investors profit substantially on an ongoing basis is buying properties for rent within the larger commercial and university cities in Spain where domestic demand is not abating.

"In fact, the city-based buy-to-let property market in Spain has suffered nothing of the negativities of over supply, with many urban areas actually not having enough rental homes to meet the demand.

In the capital, Madrid, for example, we are hearing reports that 62 per cent of apartments which become available are being rented within the first month alone.

“The low supply of good quality rental property is also affecting rental prices. For example, average monthly rents in Lorca have gone up from €400 a month to €550 over the last three months, and as the date for the opening of the new University of Lorca approaches, demand is expected to further intensify.

"Therefore, property investors looking for a market where there is strong demand for property, more attractive underlying real estate prices and strong potential for consistent year-round rental income should be focusing their search on Spain’s most in demand cities.

"Each day we are turning down clients looking for rental apartments. When one becomes available it is rented within the week, sometimes the same day!”

Spain’s local population has suffered in much the same way as the British population from rising property prices in recent years.

This has led to a situation where more Spanish than ever are seeking rental accommodation because they cannot get onto the housing ladder.

The Spanish Prime Minister has pledged significant financial help, not just to first-time buyers, but more interestingly for buy-to-let investors too.

Direct monthly financial contributions of €200 a month are being offered by the Spanish government to people under 30 years old to help with rental payments; proposals have also been made to help tenants raise deposits; and for landlords who agree to rent properties to under 35s to help them get into private accommodation, attractive taxation incentives have been proposed.

In Lorca, in the Autonomous Community of Murcia, where a new university campus is about to reach completion, demand for city-based rental accommodation has already pushed average rental rates up significantly.

The new university is the fourth campus for the University of Murcia and opens in 2009. Demand from professors, lecturers, administration staff and, of course, students is expected to have an overall positive and dramatic effect on the local housing market.

Property investors quite possibly have a once in a lifetime opportunity to buy property off-plan at below market prices as developers work hard to sell off stock, or to buy resale units in what is very much a buyer’s market, and earn rental income year-round from the domestic market who are being aided and therefore encouraged to rent.

What’s more, in an area like Lorca where there is a specific and undeniable reason for demand to surge, a buyer making a purchase today has an unprecedented opportunity to profit significantly from rising rental rates, and from potentially appreciating assets whose values will likely be increased as the property market in the city becomes more in demand.

Full story from www.homesworldwide.co.uk

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