Cheap property in Huelva and Extremadura: Spain's lowest prices, top yields

There is a clear correlation in the Spanish property market: the cities with the lowest purchase prices tend to be the ones with the highest gross yields. That holds especially true in the provincial capitals of south-western Spain: Huelva, Badajoz and Mérida have 3-bedroom flats that sell for €40,000-80,000 and, once let, bring in rents of €400-600/month, giving gross yields of 9-15%. Those yields are hard to replicate in almost any mid-priced Spanish market.

But low prices have their explanation: less dynamic economies, unemployment rates higher than the national average, declining populations and tenants with less purchasing power. Investors need to weigh high yields against these structural risks very honestly before committing capital.

The city of Huelva: the south-western market with access to the sea

Huelva has 140,000 inhabitants and an economy heavily dependent on the petrochemical and chemical industry of the Polo Industrial de Huelva (Huelva's industrial complex, where Repsol, Cepsa and Atlantic Copper have major facilities), the farming of El Condado (strawberries and berries exported to Europe) and the Port of Huelva. The city has a feature that few industrial capitals have: it is 15 minutes from Punta Umbría and from Doñana National Park, which gives it a residential appeal that goes beyond the industrial.

• Average price: Between €800 and €1,200/m² in the standard residential neighbourhoods. The most affordable neighbourhoods (El Torrejón, La Orden) have prices between €600 and €900/m². The centre and the El Molino neighbourhood have somewhat higher prices (€1,000-1,400/m²).
• Rental market: There is long-term residential rental demand from workers in the petrochemical industry and in agribusiness. It isn't the deepest market, but there is enough demand to keep well-located properties let continuously.
• Yields: From 9% to 13% gross for 80-100m² flats in well-located working-class neighbourhoods. Some deals in the most affordable neighbourhoods go above 13% gross, although the average solvency of tenants in those areas needs careful analysis.
• Andalusia's ITP (Impuesto de Transmisiones Patrimoniales, the property transfer tax): Andalusia's 7% is more favourable than that of other southern regions. For a €70,000 purchase, the ITP is only €4,900.

Badajoz: Spain's cheapest provincial capital

Badajoz has 150,000 inhabitants and the lowest average price per square metre in Spain among provincial capitals: between €650 and €950/m² in most neighbourhoods. It is literally the cheapest market in the country in terms of the purchase price of residential property.

3-bedroom, 80m² flats in neighbourhoods such as San Roque, La Paz or Santa Marina can be found for €50,000-70,000. Let at €400-500/month, they produce gross yields of 9.6% to 12%. Those are extraordinary numbers for the pure cash-flow investor.

The risk is equally extraordinary on some measures: Badajoz has a historically high unemployment rate (14-18%), an economy heavily dependent on the public sector (regional and local administration, the hospital, the university) and a stagnant or slightly declining population. Tenant selection and checking their solvency matter more in Badajoz than in any other Spanish market, because there is less margin to absorb prolonged non-payment when rents are low.

Mérida: archaeological tourism with a low-priced property market

Mérida, the capital of the Junta de Extremadura (the regional government), has 60,000 inhabitants (fewer than Badajoz) but a more stable economy as the seat of the regional government. It also has the largest group of Roman monuments in Spain (the Roman Theatre, the Amphitheatre, the Roman Bridge over the Guadiana), which give it real and distinctive tourist appeal.

Prices in Mérida are between €700 and €1,100/m². The historic centre and the area near the monuments have somewhat more demand for short-term holiday lets than the rest of the city. The holiday-let model in Mérida can be interesting for investors with little capital who want exposure to holiday lets without coastal prices.

Cáceres: a World Heritage old town with surprising prices

The city of Cáceres has 95,000 inhabitants and the best-preserved walled medieval old town in Spain (a World Heritage Site, as is Mérida). Its property prices average between €700 and €1,000/m², with the old town reaching €1,200-1,600/m² for renovated properties on the best streets.

The University of Extremadura has a campus in Cáceres with more than 16,000 students, creating student rental demand that is the economic engine of the local rental market. Yields in the Cáceres student market are between 10% and 14% on the best properties.

Related resources: For the inventory of properties available in the south-western provinces, see opportunities in Badajoz and opportunities in Huelva. For the room-letting model in small university markets such as Cáceres, the article on letting by the room has the applicable methodology. For bank-owned properties in these provinces, which have a significant portfolio from the Extremaduran savings banks integrated into Liberbank (now Unicaja), the guide to Unicaja bank repossessions explains how to access them.