How would you sum up 2015 in your region?
The property market in Madrid has become increasingly active during 2015, and is ending with a strong final quarter. While 2014 saw the beginning of foreign investor interest, who were mainly just investigating the market at that time, 2015 has proven to be the year to make transactions. Along with international buyer interest, the national market has come back with force, thanks to financial institutions opening their doors again and offering mortgages at historically low interest rates.
With the sharp rise in demand, property prices in Madrid increased at a rate of 5.6% in the last quarter. Following several years of inactivity in the construction sector, we find ourselves today in a situation where there is a definite shortage of quality product available on the market.
Lucas Fox Madrid has having their best quarter ever and the team is growing rapidly to meet the needs of the increased activity.
Who are the key buyers and where?
There are several profiles that make up the main buyers looking to purchase property in Madrid, including both national and international buyers. We have seen buyers from all over Spain who want to invest in a property in the Capital whether it be for purely investment reasons or to use as second home.
International buyers can be divided into two groups, those whom are looking for permanent residency under the Golden Visa scheme typically from Middle East and Asia, and those seeking a luxury second residence most often from Latin America, UK and France.
The majority of the demand is for key central locations of the city such as the Salamanca, Chamberi, Justicia and Cortes districts. For the buyers who prefer the suburbs, mainly families with children, look to be in and around the areas of La Moraleja, Pozuelo and Aravaca, where there is a wide choice of international schools.
What types of property are proving most popular and why?
The type of property with the highest demand is typically an apartment with 2 bedrooms and 2 bathrooms between 80-100m2, situated in a renovated classical building in a sought after central location in Madrid and priced between 500K€ – 1M€.
This property type is ideal for rental investment and second homes, as it suits a wide range of people, whether it be for single young professionals, higher education students, couples, young families or retired people. Based on rental prices in Madrid, it is possible to achieve an annual yield between 4%-5% on such properties.
At the upper end of the market, there is also high demand for larger luxurious apartments of 150m2 – 250m2 with 3 and 4 bedrooms, in renovated historic buildings with services such as concierge, gym and spa. They are most sought after in prime locations of the Salamanca and Chamberi Districts. These are lifestyle purchases mainly for second homes, located in the vicinity of the highest quality fashion boutiques and gastronomic restaurants that the Capital has to offer.
Have you noticed any significant nationality trends? And why?
The year 2015 has seen a large number of investors coming from London, Miami and Dubai. The devaluation of the Euro in recent months has created an influx of clients who hold liquidity in Sterling and US dollars and wish to take advantage of the currency exchange opportunities. London being one of the most cosmopolitan business centres in the world, we have in seen a wide range of nationalities originating from all the continents of the world. Miami is the place where many of the wealthy from Latin America reside. Clients from Venezuela, Mexico and Columbia have been very active in the Madrid market. Finally, as Dubai is the city in the Middle East that is holds much capital from wealthy people from all round the region, the escalation of conflict in the area has prompted interest from clients from Syria, Kuwait and Saudi Arabia.
What is the outlook for 2016?
I think the prospects for the property market in Madrid are very optimistic for 2016. Madrid is an underdeveloped market that has only had international exposure in the last couple of years. Madrid can be compared to a hidden gem still to be discovered and as time is progressing, more and more people are learning about the wonders the city has to offer. It is rare to find a place in the world that has the combination of opportunistic economic indicators along with exceptional lifestyle conditions. To maintain growth and satisfy the demand, we hope to see more new development/renovation projects become available on the market in the upcoming months.
Providing the upcoming national elections do not result in radical changes in policy. I think Madrid will continue to be an attractive place to invest for both the national and international investors for the years to come.