RENTAL returns on Spanish properties are cooling in some of Spain’s most popular expat hotspots, such as Palma and Madrid.
But savvy investors can still find massive value in secondary cities — and some surprising opportunities in asset classes most buyers overlook.
The average gross yield for a buy-to-let home in Spain has dropped to 6.7% in the first quarter of 2026, down from 7.3% in the same period last year.
READ MORE: Benidorm and Costa Blanca property prices skyrocket in first quarter of 2026
But despite the national slump, putting your money into bricks and mortar still comfortably beats the 3.5% return offered by 10-year Spanish State Bonds — at least if you choose wisely.
A new report by Idealista has revealed a growing divide between saturated major hubs and highly profitable provincial capitals, calculated by comparing listed sale prices against rental asking prices across Q1 2026.
Murcia is currently the most lucrative city for residential landlords, boasting an impressive gross yield of 7.5%.
It is closely followed by Segovia and Lleida at 7.3%, while Huelva, Jaen and Castellon all offer strong returns of 7.2% — making the latter particularly attractive for investors eyeing the Costa Azahar expat belt.
Lugo, Zamora, Huesca and Almería round out the top tier, all delivering yields at or above the 6.7% national average.
In stark contrast, returns in traditional expat and tourist havens have plummeted due to skyrocketing purchase prices.
San Sebastian offers the worst returns in the country at just 3.5% — a figure that merely matches, rather than beats, the State Bond rate — while Palma has slumped to 4.4% and A Coruña to the same level.
Madrid investors are seeing yields of just 4.7%, and returns in Barcelona have flatlined at 5.2%.
Garages: Where the real danger lies
While the residential picture is mixed, it is the little-considered garage market where investors face the starkest warning.
Six Spanish cities are now seeing garage yields fall below even the State Bond floor of 3.5%: Salamanca (2.6%), Palencia (2.7%), Palma (3.2%), Granada (3.3%), Málaga (3.4%) and Santander (3.4%).
As an unusual investment vehicle, expats considering a garage purchase in Palma or on the Costa del Sol, the numbers are unambiguous — you would generate a better return leaving your money in a Spanish government account.
The contrast with the top end of the garage market is striking, however.
Murcia — already the standout for residential returns — is also the national leader for garage yields at 10.6%, followed by Castellon (8%), Ávila (7.1%) and Barcelona (6.7%).
In Madrid, garage yields sit at 5.1% — above the residential rate in the capital, and well clear of the bond floor.
Commercial property leads the field
However, it is commercial real estate that remains the most profitable sector overall, with office spaces across Spain returning 11% — down slightly from 11.5% a year ago — and retail units offering 9.9%.
Among offices, Burgos leads at 10%, followed by Sevilla (9.9%) and Zaragoza (9.7%).
For retail, Lleida tops the table at 11.4%, with Tarragona (11%), Zaragoza (10.8%) and Huelva (10.5%) also delivering exceptional returns.
The weakest office markets are A Coruña (5.9%), Madrid (6.2%) and Valencia (6.2%), while Palma and Madrid bring up the rear for retail at 6.9%.
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