Market crashes, raising of interest rates by the European Central Bank, inflation reaching maximum rates in July this year (10.8%) … in short, we are currently living in an era marked by inflation which, as a result, means that we should employ caution and be extremely selective when considering any project or investment.
In this final quarter of 2022, and 2023 looks to be similar as well, property has become firmly established as a safe haven investment. Property investment is a good option for anyone who has savings and it is a tool for combating inflation. And this derives from a principle that is as sound as it is well proven, namely, that money loses value if it remains in the bank, by investing in property money appreciates along with the property. In other words, property is a profitable and safe investment: it offers greater revenue than other more risky financial products. In this post we’ll tell you exactly why property has become established as a safe haven investment.
Housing is a basic need that is also elastic, which means that demand is maintained even as prices rise. The Idealista price report is a clear example of this fact, with figures that speak for themselves. According to the report, second hand property in Spain reached an average price in August of 1951 euros per square metre, a 5.26% rise compared to the same month in 2021. If we look at the areas where VAPF is active, the data is even more striking compared to 2021: Altea (2,601€/m2, +15.6%), Benitachell (2,994 €/m2, + 28.7 %), Benissa (2,928 €/m2, + 15.5 %) y Denia (2,276 €/m2, +14.2%).
Rentals: immediate profits
This in another great advantage of investing in property. As the price of housing increases, profits can be made through renting the property. Looking at Idealista’s data once again, in the second quarter of the year, gross profitability of rentals in Spain was 6.36% (an investment is considered to be ideal from 5% upwards). Looking at 2023, the increased cost of mortgages and the effect of inflation on the family economy will mean that some will not be able to buy a home and they will opt to delay their decision to purchase, and rent instead which means that there will be an increased demand for rental property.
Or Long term investment
A property can provide stable income over time. Investing in housing as a safe haven investment is something that is increasingly viable as the geopolitical scenario brings changes that are resulting in negative financial consequences at a global level. Aside from paying off the investment, they can also provide “stable” income and go on to be sold at a later date. In fact, a recent study carried out by the website Idealista revealed that “15.2% of survey respondents in 022 intend to buy a new property as an investment, a trend that has risen by three points in the last six months”.
Financial markets in free fall
The rise in interest rates that we mentioned at the start, problems with supply chains, the rise in prices of raw materials due to the serious geopolitical problem of the war in Ukraine have all led to falls in stock and bond markets: S&P 500 (-14.9%), IBEX 35 (-7.5%), NASDAQ (-22.4%), DAX (-18.3%) and more besides, make this sector of tangible assets increasingly attractive. It is important to highlight the fact that safe haven investments are not just safe because of those price rises but also because the rental market is always a profitable one.
As you can see, property is a lucrative and safe investment, as it provides greater revenue than other financial products and is beneficial in both mid and long term. At VAPF we have a wide range of villas and apartments on the Costa Blanca Norte, one of the most exclusive and beautiful parts of Spain, where the waters of the Mediterranean and over 300 days of sunshine will be the back drop to your daily life. We suggest you keep an eye on our upcoming blog posts and check out our Facebook and Instagram profiles to keep up with all our news.