Spain’s rental market is still running hot, and that heat is throwing off returns that would have looked punchy even a year ago.
With supply tight and demand still queuing round the block, tenants are feeling the squeeze – but for owners weighing a buy-to-let, the numbers are getting harder to ignore. Fresh figures from property portal pisos.com put the average gross rental yield at 6.74 per cent in July 2025, up from 6.04 per cent a year earlier and nudging above June’s 6.68 per cent. Put simply: a standard 90 m² flat bought for €216,810 and let at €1,218 a month would have thrown off €14,623 in gross annual income. That’s before costs, of course, but it’s a sign of how much the calculus has shifted in owners’ favour as asking rents ratchet up.
Buy-to-let hotspots: Tarragona tops the table
Here’s the twist: the biggest returns aren’t in the biggest cities. In July, Tarragona led Spain’s buy-to-let leaderboard with a striking 8.07 per cent yield. Close behind came Jaén (7.35 per cent), Ávila (7.10 per cent), Castellón de la Plana (7.05 per cent) and Córdoba (7.05 per cent) – all clearing that eye-catching 7 per cent threshold. What links these markets isn’t hype; it’s value. Purchase prices remain comparatively accessible, while local demand has proved resilient – a blend that lets rent cover more of the mortgage and then some. For many would-be landlords, that’s the sweet spot: you’re not betting on trophy-city capital gains to make the numbers work, you’re banking on steady occupancy and a sensible price-to-rent ratio.
There’s also a practical point that gets lost in the noise of headline postcodes. Smaller provincial capitals often come with fewer bidding wars, less speculative froth and a tenant base that’s more need-driven than trend-led. When the yield is doing the heavy lifting, that stability matters. It’s not glamorous – and that’s precisely why the maths can look so good. The message from July’s table is unambiguous: if income is your north star, mid-sized cities are punching well above their weight.
Glamour trap: why San Sebastián, Palma and Málaga underperform
At the other end of the spectrum sit some of Spain’s most coveted destinations — and they’re precisely where yields look thinnest. Donostia–San Sebastián posted a modest 3.67 per cent, with Palma (4.35 per cent), Pamplona (4.59 per cent), Cádiz (4.60 per cent) and Málaga (4.63 per cent) also lagging the national average. None of this means they’re ‘bad’ markets; it means purchase prices have raced ahead of achievable long-let rents, compressing the return for income-focused buyers.
It’s the classic glamour trap. You pay a premium for the postcard view and the brand-name postcode, but when you run a conservative buy-to-let spreadsheet — mortgage costs, tax, insurance, service charges, maintenance, the odd month’s void — that headline rent suddenly doesn’t stretch as far as you hoped. If your plan relies on flawless occupancy and aggressive rent rises just to scrape a target return, the market is telling you to look elsewhere. Spain has no shortage of attractive coastal and heritage cities; the trick is finding the ones where the entry price hasn’t already priced out the yield.
Madrid vs Barcelona: What the big two are whispering to investors
Spain’s heavyweights are inching in different ways, but the takeaway is similar: yields are edging up, just not into the seven-per-cent stratosphere. Barcelona improved from 6.78 per cent in June to 6.88per cent in July, while Madrid ticked from 4.93 per cent to 5.03 per cent, according to pisos.com’s head of research Ferran Font. That split tells you plenty about each city’s starting point. Barcelona already sits in healthy mid-six territory, which suggests rents are doing useful work against high purchase costs. Madrid crossing the 5% line is notable too — a psychological milestone that will tempt buyers who’d written it off as too pricey for income.
For landlords deciding where to plant their flag, the lesson isn’t “avoid the big two”. It’s to be clear about your goal. If you want liquidity, depth of tenant demand and the reassurance that comes with globally known markets, Madrid and Barcelona will always have their fans — and rightly so. But if your priority is monthly cash flow, July’s leaderboard says the best bang-for-buck is outside the usual suspects. In a year where the national average has climbed 70 basis points, the gap between “nice to own” and “pays for itself” has rarely been clearer.
There are, as ever, a few housekeeping notes before you get carried away. Gross yield isn’t net yield. Factor in community fees, IBI (council tax), landlord insurance, legal costs, maintenance and any financing. Budget for realistic voids — not every tenancy turns over like clockwork — and keep a cushion for compliance upgrades. If you’re targeting student-heavy cities, check the academic calendar and churn patterns; if you’re tempted by tourist hotspots, remember that long-let yields (the ones we’re discussing here) don’t necessarily move in lockstep with short-let dynamics.
Still, the direction of travel is hard to miss. With the average gross yield at 6.74 per cent and five capitals clearing 7 per cent, Spain’s rental market is serving up an unusually generous window for income-minded investors. Tenants won’t cheer that reality, and policymakers may yet try to tinker at the edges. But for owners sitting on an empty home – or buyers prepared to look beyond the glossy postcards – 2025’s mid-tier map looks rich with opportunity. The clever money isn’t chasing the shiniest skyline; it’s following the yield.
Stay tuned with Euro Weekly News for more news about property & investment
