Cheap property in Burgos and Logroño: high yields, low competition

Investors looking for 7-10% yields in stable rental markets without the saturation of the big urban hubs should look at two cities that rarely appear in property investment analysis: Burgos and Logroño. Both are provincial capitals in the north of the Meseta (Spain's central plateau), both have economies based on the agri-food industry and services, both have universities with student rental demand, and both have purchase prices well below what their income per head and quality of life would justify.

They are small markets, which has its limitations. But small also means less competition from professional investors and an easier time finding properties at prices that haven't existed in Madrid or Barcelona for years.

Burgos: the city of the Camino de Santiago and El Cid

The city of Burgos has 175,000 inhabitants and an economy heavily based on the food industry (Grupo Dhul, Leche Pascual and Campofrío have plants in the province), construction and industrial installation work, and a public sector that provides stable employment. Burgos Cathedral (a World Heritage Site) attracts tourism all year round, thanks also to its position on the Camino Francés (the French Way of the Camino de Santiago).

• Average price: Between €1,000 and €1,500/m² in most neighbourhoods. El Gamonal (the largest and most working-class neighbourhood), Capiscol, Las Delicias and the area around the Plaza de España have the best prices for residential investors.
• Rental market: The Universidad de Burgos has 8,000-9,000 students, who create student rental demand in the neighbourhoods close to the campus (the north of the city). Long-term residential letting has a good base in the industrial and working-class neighbourhoods.
• Yields: From 7.5% to 10.5% for 3-4 bedroom flats in well-located working-class neighbourhoods. El Gamonal usually has the best ratios in the city.
• Castilla y León's ITP: The standard rate of the ITP (impuesto de transmisiones patrimoniales, the property transfer tax) is 8%, reduced to 4% for young people under 36 buying their main home. For investors, 8% applies, barring exceptions.

Logroño: the capital of La Rioja and its wine economy

Logroño has 155,000 inhabitants and is the capital of La Rioja, the Spanish region with the greatest worldwide reputation for wine. The local economy has a very significant food and wine industry component, with wineries such as La Rioja Alta, CVNE and Muga based in the region, plus a base of services and regional administration.

• Average price: Between €1,100 and €1,700/m² in the city of Logroño. The El Cubo neighbourhood, the renovated Casco Antiguo (the old town) and the area around the Gran Vía have the highest prices. The neighbourhoods of Yagüe, Cascajos and the Iregua area have more affordable prices (€900-1,200/m²).
• University market: The Universidad de La Rioja has some 7,000 students in Logroño. It isn't a huge number, but it creates demand for room-by-room letting in the university neighbourhoods, with yields of 9-12%.
• Wine tourism: Wine tourism in La Rioja creates very active demand for weekend holiday lets, especially in autumn (the grape harvest) and spring. Apartments in Logroño's Casco Antiguo with a tourist licence have high occupancy in those seasons.
• La Rioja's ITP: The ITP rate in La Rioja is 7%, more favourable than in neighbouring regions such as Castilla y León (8%), although not more favourable than in the Basque Country, where homes generally pay 4%. This slightly reduces the cost of acquisition.

Auctions in Burgos and Logroño: minimal competition

The judicial districts of Burgos and Logroño produce a moderate volume of court auctions, with starting prices usually between €40,000 and €100,000 for standard residential flats. Competition at these auctions is among the lowest in Spain: there are very few investors specialising in auctions in these cities, which keeps winning bids in very favourable ranges. For investors who want to try the auction model in a low-competition environment before moving on to Madrid or Barcelona, Burgos and Logroño are the best markets to practise in.

The demographic risk both cities share

Both Burgos and Logroño have population growth that is stable at best and slightly negative at worst. An ageing population, young people leaving and little economic immigration compared with the big cities are structural factors that limit the growth of rental demand in the long term. This factor doesn't invalidate a 5-10 year investment with positive cash flow, but it does temper the prospects for capital appreciation over very long horizons.

Related resources: For the inventory of assets available in Burgos, see opportunities in Burgos. For a comparison of ITP between La Rioja (7%), Castilla y León (8%) and other northern regions, the article on ITP by region has the complete tax map. For room-by-room letting in small university markets such as Burgos and Logroño, the article on letting by the room has the methodology for smaller markets.