Do you own a second home? Are you thinking of buying a new house but aren’t sure what to do with your old one yet? When it comes to investing in real estate , many questions tend to arise—not only about the process itself, but also about the strategies we should use. Thorough market research, as well as a careful assessment of your personal finances, is essential when making decisions related to real estate.

So, if you’re unsure whether to rent or sell your home, at Culmia we’ll explain your options and help you determine which one is best for your needs. Keep reading to find out which option is right for you.

The Rise in Rent Prices

While in previous years, as a result of the COVID-19 pandemic, we saw rental prices drop significantly, this trend has now reversed. During the first half of 2022, a notable rise in rental prices was already evident nationwide, reaching €11.3 per square meter in July—figures equal to those seen before the start of the pandemic.

And now we are also seeing the onset of a phase marked by a certain shortage of apartments available for rent. Given this shortage of supply, it is likely that the market will see price increases for the limited supply that remains available. Furthermore, as a result, we are likely to see another boom in the supply of vacation rentals.

The real estate sector is on the rise

In contrast to the lack of demand for rental apartments and the ever-rising prices of this type of housing, we are seeing a very clear increase in the real estate market. More and more people are taking the plunge to become homeowners.

Consequently, home prices have also rebounded, currently standing at 1,888 €/m2—the highest level in the past five years.

Despite this, the rental rate remains higher than the home purchase rate, since certain requirements must be met to make the transition from renting to homeownership, and in most cases, this involves taking out a mortgage—which is not always feasible.

In fact, changes are also taking place in the mortgage market that will affect the purchasing power of potential buyers. This is because, due to inflation control policies, central banks are moving to raise interest rates, which directly affects the benchmark interest rates for mortgage loans, such as the Euribor, the most widely used in Spain.

Carefully assess your financial situation before deciding whether to sell or rent.

Ultimately, choosing one option over the other doesn’t necessarily mean you’re making a good or bad choice. They are simply two different ways of approaching the use of a home.

When making this decision, one of the factors you should carefully consider is your savings and income levels. As you probably know, to qualify for a home purchase, you need to have between 20% and 30% of the property’s value available upfront to cover the portion not covered by the mortgage and the costs associated with real estate transfer taxes. Therefore, if you want to sell your old home to buy a new one, you should also take this factor into account.

Similarly, when approving a mortgage, other factors are also taken into account, such as job stability, the buyer’s age, and monthly income, to ensure that the buyer can make the monthly mortgage payments to the bank. The economic situation and whether or not a bank will approve a mortgage can be a decisive factor when buying a home. Perhaps this is one of the reasons why buyers might face more challenges, but the reality is that the number of mortgages approved is expected to remain steady.

What are your plans for the future?

On the other hand, in addition to your financial situation, it’s very important to think carefully about your long-term plans for the future. Do you have a stable job that allows you to settle down in one place? Are you looking for some stability in terms of housing?

Questions like this are the basis for making your decision, beyond financial analysis. If you’re certain you need to start fresh and forget about that house, your best bet is to sell it. If, on the other hand, you have doubts and see renting as an investment, you can also consider that option. After all, even though finding tenants might be a bit of a headache at first, having a monthly rental income in addition to your salary can be a very attractive bonus.

In addition to these two factors, analyzing the real estate market is essential for understanding how trends are evolving and determining whether or not now is the right time to make a transaction of this nature. To that end, we recommend that you always seek the assistance of real estate professionals who can help you.

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