Introduction

The first step in a rental investment project is to decide where to invest:

• Which is the most profitable region?
• Which is the most profitable city?
• Which neighborhoods are the most profitable?

Let's start with the regions, then work our way down to the cities, then the neighborhoods.

Spain's most profitable regions

The three most profitable regions in which to invest are as follows:

• Valencia (Valencian Community) with 8.2% profitability
• Murcia (Murcia Region) with 8.8% profitability
• Cantabria with 7.3% profitability

What these three regions have in common is their low real estate prices.

Murcia (€1,207/m2), Valencia (€1,609/m2) and Cantabria (€1,838/m2) all have prices per square meter below €2,000.

Conversely, the least profitable regions are also the most expensive:

• the Balearic Islands with 5.0% profitability
• Madrid (Madrid region) with 5.5% profitability
• the Basque Country with 5.5% profitability

In these three regions, which are therefore the least profitable in the country, the average price per square meter exceeds €3,000. 

In the ranking below, we can see that the Valencia region (8.2% average profitability) is 50% more profitable than the Madrid region (5.5% profitability). 

For an investment of €100,000, the average gross annual rental income will be as follows:

• 5,500 € in the Madrid region
• 8,200 € in the Valencia region (+49% more profitable than Madrid)

Spain's most profitable cities

The most profitable cities are, unsurprisingly, in the most profitable regions.

Three cities in the Valencia region are among the most profitable in Spain, depending on your budget:

• Gandia, 70,000 inhabitants, price per m2 of 1,000 euros, profitability of 11.5%.
• Sagunto, 65,000 inhabitants, price per m2 of 1,000 euros, profitability of 9.4%.
• Valencia, 800,000 inhabitants, price per m2 2,500 euros, profitability 7.7%.

Here are our rankings of cities to invest in, sorted by budget bracket to suit your needs.

Best cities to invest less than 80,000 euros

What are the most profitable cities in Spain to invest in on a small budget? 

Investing in Spain with less than €80,000 and over 9% profitability? It's possible in towns like Gandia (Valencia), Elda, Talavera de la Reina, Sagunto and Reus. Of these, Gandia is the most profitable in Spain. 

Did you know? 

Terreta is present in Gandia. We have helped our customers to make numerous rental investments in Valencia (the most profitable region) as well as in Gandia. Please contact us to find out more.

Best cities to invest between €80,000 and €120,000

Between 80,000 and 120,000 euros, you can choose to invest in Orense, San Cristóbal de la Laguna, Torrent (Valencia) or Alicante, with average gross yields of over 6%. For example, Torrent (20 minutes from València) offers a return of 6.20%.

Best cities to invest between 120,000 and 200,000 euros

If you have a budget in excess of 120,000 euros, the most profitable cities are Valencia, Santander and Salamanca. In addition to these provincial capitals, there are also a number of towns around Madrid (Parla) and Barcelona (Hospitalet, Santa Coloma de Gramanet) that may be worth considering.

Valencia, for example, has a rental yield of 7.70%, ahead of Getafe (6.50%).

Reasons to invest

Prices and rental yields should continue to rise

To understand where to invest and how to invest your money, you need to know why prices and yields should continue to rise.

In addition to the fact that rental yields are significantly higher than in other European countries, a number of economic, real estate and demographic factors will continue to boost profitability over the coming years.

Do you know why investing in Spain is particularly interesting? In this article, we share with you some information that should be of use to you, and reinforce the meaning of your investment, the "why" dear to Simon Sinek.

2 million housing units needed

First of all, it's worth noting that the new housing construction market is in crisis, even though the need for housing is enormous. There is currently a shortfall of over 2 million units to satisfy rental demand. 

Rents are rising sharply

Demand for housing is so strong that rental prices have risen by over 40% in the last ten years. In the Valencia region, rental prices have risen by over 68%. When rents rise, rental yields increase, unless sales prices evolve in the same proportions.

Purchase prices are still at 2005 levels

On the purchase side, prices are still below the peak reached before the 2008 crisis, despite their annual increase of between 3% and 6% per year since 2015. 

Prices are gradually recovering, moderated by banking policies that require buyers to make a substantial down payment.

In 2024, prices will still be at 2005 levels, close to 2,000 euros per square meter.

50% higher profitability than 15 years ago

Thanks to this context, average rental profitability in Spain is now 50% higher than it was fifteen years ago. From an average of 4% in 2008, it is now close to 7%. 

At the top of the list of most profitable regions, the Valencia region is expected to achieve over 8% profitability in 2023. There's every reason to believe that prices, and profitability, will continue to rise, due to the structural shortage of housing on the sales and rental markets.

The most profitable districts in Madrid, Barcelona and Valencia

Which is the most profitable city between Madrid, Barcelona and Valencia?

When it comes to Spain's most profitable cities, it's only natural to think of Madrid, Barcelona and Valencia, as these are the country's three largest.

Among these 3 big names, the most profitable city is Valence with 7.7% average rental return, i.e. 50% higher than its two rivals. 

Nevertheless, Madrid (4.9%) and Barcelona (5.2%) offer excellent returns, higher than other European capitals. Take Paris, for example, with a return of just 3%. 

Why is Valencia more profitable than Madrid and Barcelona?

This is due to the fact that Madrid and Barcelona are cities where the price per square meter is around €5,000, whereas it is €2,500 in Valencia, i.e. half the price. 

However, there's no such difference in rental prices.

So it's cheaper and more profitable to invest in Valence. 

Another major advantage for Valencia is that prices are rising three times faster than in Barcelona. In fact, in 2023, prices rose by 3.8% in Barcelona, compared with +9.9% in Valencia. 

Madrid's most profitable districts

With an average profitability of 4.9%, Madrid is clearly more profitable than other European capitals such as Paris (3%).

Within the capital, some neighborhoods are clearly more profitable than others. The five most profitable neighborhoods in Madrid are:

• Villaverde (7.5%)
• Puente de Vallecas (7.3%)
• Usera (6.9%)
• Carabanchel (6.5%)
• Latina (6.3%)

Conversely, the three least profitable neighborhoods are Salamanca, Chamartin and Chamberi. A surprise? Not really, since these are among the most expensive neighborhoods, at between €5,000 and €7,000 per square meter.

Valencia's most profitable neighborhoods

Valencia is likely to catch up with Barcelona and Madrid over the next ten years, as its price per square metre (€2,500) is still far from that of its rivals (€5,000). 

Prices are rising faster here than in its two main rivals, and returns are much better (50% higher). The Spaniards themselves are not mistaken. In fact, we help many Madrid and Barcelona residents invest in Valencia. 

Madrid and Barcelona residents know this, and we help many of them to invest in Valencia. But which are the best neighborhoods in which to invest?

The most profitable districts in Valence are :

• Rascanya (8.9%)
• Pobles del Sud (7.7%)
• Benicalap (7.4%)
• L'Olivereta (7.3%)
• Jesus (7%)

Conversely, L'Eixample and El Pla del Real are the two least profitable, which comes as no surprise since purchase prices there are among the most expensive, at €3,000 and above.

Barcelona's most profitable districts

Barcelona's most profitable districts are as follows:

• Nou Barris (6.3%)
• Sant Marti (5.9%)
• Sants-Montjuic (5.5%)
• Horta Guinardo (5.3%)

On the other hand, Les Corts and Sarrià-Sant Gervasi are the two least profitable, which is no surprise since purchase prices there are among the most expensive, above the €5,000 per square meter mark.