(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 (as calculated in section b).
- Bars: green denotes positive appreciation; red denotes negative.
- Black dotted line: annual inflation rate, represented in percentage.
(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 the cost of a home purchase in Spain through rental income.
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