Rental Yield Variance Across Costa Blanca Municipalities: A Statistical Decomposition of Return Heterogeneity

1. Introduction

Rental yield is the primary metric by which buy-to-let investors assess the income-generating potential of residential property. In the Spanish coastal market, yields vary substantially across municipalities due to differences in acquisition prices, rental demand intensity, seasonality, and tourist infrastructure. This paper examines yield variance across 77 municipalities using estimated gross rental yields for 1,881 new-build properties tracked by Avena Terminal.

2. Methodology

Gross rental yield is computed as estimated annual rental income divided by asking price, expressed as a percentage. Rental income estimates are derived from comparable market data incorporating seasonal occupancy adjustments. Town-level yields are computed as the arithmetic mean of property-level yields within each municipality. We compute standard deviations to quantify intra-town yield dispersion and coefficient of variation (CV) to enable cross-town comparisons of relative dispersion.

3. Data and Results

3.1 Aggregate Yield Statistics

3.2 Top 10 Highest-Yielding Municipalities

3.3 Bottom 10 Lowest-Yielding Municipalities

3.4 Yield by Property Type

3.5 Yield by Bedroom Count

4. Findings

The analysis reveals substantial yield heterogeneity across Costa Blanca municipalities. The overall mean gross yield of 3.71% masks a standard deviation of 2.02 percentage points. The top-yielding municipalities achieve yields up to 9.5%, driven primarily by lower acquisition prices rather than higher absolute rents. Conversely, premium locations with high absolute prices deliver lower percentage yields despite stronger absolute rental income.

Property type significantly influences yield outcomes. Smaller units (apartments and studios) tend to deliver higher gross yields due to favourable price-to-rent ratios. Bedroom count shows an inverse relationship with yield, as additional bedrooms increase purchase price proportionally more than they increase rental income.

5. Conclusion

Yield-seeking investors in the Spanish coastal market face a clear trade-off between yield magnitude and location quality. Municipalities offering the highest gross yields tend to be lower-priced, secondary markets with potentially higher vacancy risk. A diversified portfolio approach, combining high-yield and premium-location assets, may optimise the risk-return profile. Further research should incorporate net yield calculations accounting for management fees, IBI tax, community charges, and vacancy periods.