The Spanish rental property market is experiencing some key shifts in mid-2025, as the latest report from the Observatory of Housing and Urban Agenda (Mivau) highlights a noticeable decline in rental yields despite continued increases in average rent prices.
According to Mivau, the gross rental yield—the annual return landlords receive from rent as a percentage of the property’s value—has dropped to 3.19%, falling from a high of 4.64% recorded in 2014. This marks the lowest return seen in recent years and comes at a time when demand for rental properties is higher than ever, but supply struggles to keep up.
Rising Rents, But Lower Profitability
While tenants are facing steeper rent payments due to the squeeze in supply, the profitability for property owners has paradoxically diminished. The Bank of Spain’s data shows that rental yields peaked at 4.64% in late 2014 but have steadily declined since 2018, reaching their current low.
Although the Mivau report does not elaborate on specific causes, industry experts point to several contributing factors:
- Increasing property purchase prices
- Stricter financial conditions for buyers
- Growing concerns among owners regarding legal stability and regulations
These combined pressures have chipped away at the overall profitability of rental investments, even as the rental market remains highly active.
Foreign Buyers Down to 16.9%, Lowest Since Pandemic
Mivau’s quarterly bulletin also offers insight into the property sales market, including transactions by foreign buyers. In the second quarter of 2025, foreign buyers accounted for 33,109 property transactions—equal to 16.9% of all home purchases during the period. While this marks an impressive total compared to a decade ago (6.75%), it is the lowest percentage since 2021 and below the 20% seen in late 2023.
Most foreign buyers (59.1%) already live in Spain, and second-hand properties remain their top choice. The largest groups continue to be British (7.77% of foreign buyers), followed by Germans, Dutch, Moroccans, Italians, French, Romanians, and Belgians. Notably, Polish buyers are on the rise, possibly due to the impact of the war in Ukraine, with many seeking safety and second homes in Spain.
Market Outlook
Despite robust demand from both locals and foreigners, the downward trend in rental yield suggests that investors must carefully evaluate the changing landscape. Rising property prices, evolving regulations, and shifting buyer profiles mean that both domestic and international players need to adapt to ensure strong returns in Spain’s property sector.
