(a) Housing return on investment
- Housing gross appreciation (%), Spain.
- Bars: green denotes positive appreciation; red denotes negative.
- Black dotted line: annual inflation rate, represented in percentage.
- Housing return on investment (%): considers both gross asset appreciation and net rental return.
- Bars: green denotes positive appreciation; red denotes negative.
- Black dotted line: annual inflation rate, represented in percentage.
Interpretation and observations
By looking at the housing appreciation, i.e. whether if houses increase or decrease in value year over year. We can distinguish several outstanding periods:
- 1986 - 1990: Strong revaluation.
- 1991 - 1993: Stagnation.
- 1994 - 2007: Steady revaluation.
- 2008 - 2013: Strong devaluation.
- 2014 - 2019: Moderate revaluation.
- 2020 - 2022: Covid-19, impact and rebound.
(b) Average rental return
Rental source: Idealista
- Price-to-rent ratio (%, net and gross): annual percentage of housing rental return in Spain.
- Price-to-rent ratio (time, net and gross): number of years to fully recover a home purchase in Spain.
Interpretation and observations
The charts from above show the ratio between the purchase price and the rental price (both in %; and in time, years). In essence, it's an indicator similar to the price-to-earnings ratio (P/E) used in the stock market analysis. It can be interpreted as follows:
- At 2010 prices, it took 27.8 years to fully recover a house purchase through rental returns, at a 3.6% annual rental return.
- At 2020 prices, it took 17.5 years to fully recover a house purchase through rental returns, at a 5.7% annual rental return.
Data sources
- Housing prices, from 1985 to 2006, according to Sociedad de Tasación (Access to data is under request, but can be seen in the linked publication): Publication, Link
- Housing prices, from 2007 onwards, according to the notaries (Grupo 5 > Acto 501 - Compraventa inmuebles > Inmuebles en fincas urbanas, viviendas): Link
- Inflation data (Table: average inflation Spain (CPI) - by year): Link
- Rental prices according to Idealista (for modelling net returns, a 25% has been subtracted from the gross return): Link
- Housing prices according to Idealista (for coherence purposes, rental returns have been calculated using Idealista housing prices): Link