How much profitability can I get from a property

Despite the drop in home profitability during 2020, real estate investing remains an interesting asset that can pay significant dividends in the market.

At the end of 2020, the profitability index had fallen to 6%, almost 4 points below the year 2019. By 2021, with the arrival of the vaccine against COVID-19, the real estate market has acquired an upward trend.

It is expected that, by next summer, the population will be vaccinated, at least 70%. These predictions are an incentive to invest in the real estate market, as the price of rentals could rise by 65%, especially in tourist or vacation destinations.

There is a particularly attractive area for real estate investment: the Costa del Sol. Many foreign tourists will gather here, seeking to regain all the freedom lost during the months of social confinement. You may wonder. How much profitability can I get from a property? Keep reading to find out.

Despite the housing crisis of previous years, the real estate market was considered healthy and in sustained growth. Then, the health alert status for COVID-19 occurred at the beginning of 2020. This situation brought as a consequence the paralysis in all sectors of the national economy, where the real estate sector did not escape.

As a consequence, the census and property valuation activities stopped; mortgage concessions and other transactions came to a standstill. Operations dropped to nearly a third from earlier times, according to expert reports.

The financial cataclysm that shook the foundations of the real estate sector caused home prices to fall to levels of 5 years ago. However, this drop in cost variations does not have the same impact for all properties. By January 2021, the sale of homes fell more than 12% compared to the previous year, while mortgage loans for home purchases fell by 3.8%, according to data from the National Council of Notaries.

If you want to acquire a home and you want to know its profitability, you should analyze the relationship between the invested capital and the profits you can obtain from the use of that property. These are established by means of a percentage indicator, widely used in the business sector. The purchase of rental homes is one of the options with the highest profitability in the real estate market. But if you are not sure about the decision you should make, it is better to put yourself in the hands of a specialized real estate advisor.

When choosing the best areas for investment in Spain, you should look for those in which rents tend to grow and the supply of new construction has acceptable levels. Today, Madrid and Barcelona are leading the price recovery, while the Costa del Sol offers a promising immediate future.

Malaga, for example, has experienced constant and accelerated economic development. The momentary brake that it has suffered, due to the pandemic, is not a reason to lower the profitability that this type of investment has always offered. Across the Costa del Sol, real estate risk has remained low and, in hopes of the Covid-19 vaccine, enthusiasm for investments has returned.

There are many coastal municipalities that make up the Costa del Sol. All offer high returns in the housing business. Marbella and Mijas stand out among the four municipalities with the highest growth and profitability. Estepona, Benalmádena, Casares and Benahavís are places in expansion, where investments are strongly oriented. The average profitability can reach up to 9%, according to an article on the Urban Data Analytics portal.