Investing in real estate is safe and stable, provided all the different parameters have been taken into account by your real estate agency.
Net profitability for newly constructed or second hand real estate investments can vary between 2.5 % and 7 % yearly.
The fact is that in just a few decades, international tourism has exploded on Ibiza. In the 1960s, there were not more than 40,000 tourists coming to the island. Currently, Ibiza receives more than 4 million tourists every year, 3 million of which visit between June and September.
Ibiza’s tourism market dynamics have walked hand in hand with the exponential and constant real estate price increase that has taken place in the last 30 years. Ibiza is currently one of Spain’s most expensive locations.
Rigid town planning and construction regulations will derive in dwindling supply in the next few years, which will in turn drive prices up once again. Demand for luxury properties continues to be extremely high throughout the island.
a) Second-hand property investment:
Supply of second-hand property is higher than demand, which allows for finding property in better locations, closer to the town centre. Second-hand homes have a certain charm about them that new ones don’t. Additionally, it is also possible to add mod cons to the old, while adding allure to new build homes is more challenging.
Given that purchase prices for second-hand homes are lower than those of new build properties, their profitability over time is higher (except for large building renovations). In addition, there’s the possibility of moving in straight away if no renovation are foreseen.
b) New build rental investment:
Properties built in the last five years are considered new build properties. The main advantages of new build property include comfort and guaranteed adherence to the current regulations. New build property also offer tenants optimum thermal and acoustic insulation, which goes hand in hand with comfort, safety, and energy savings.
c) Off-plan rental investment:
Selling off-plan means selling a property that has not yet been built. This kind of operation is popular among real estate investors and speculators – the property is purchased before construction has started, but once the construction plans and building licenses have been issued. This kind of purchase is estimated to be 15 % cheaper on average than a second-hand market purchase. Obtaining a “bank guarantee” from the bank is recommended for this type of operations.
Note: In general terms, investments in Spain tend to be more profitable than in other neighbouring countries on account of purchase prices and fees being lower, rentals being taxed at lower rates, and because most rental charges are deductible from the income. In addition, a 40 % bonification is applicable to rental contracts lasting more than two years.