Madrid is booming

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Madrid has long been an underrated capital, overlooked by investors and tourists, but no more. The city has been pegged as the second best city in Europe to invest in for property for 2025 according to a study run by PwC and the Urban Land Institute. Moving up from 8th place, the city has overtaken Paris due to a mix of macro and microeconomic factors, high quality of life and fiscal and economic policies.

Economic and Lifestyle Drivers of Madrid’s Real Estate Boom

Economic Stability and Growth

Madrid is increasingly attracting multinational corporations and startups alike. The city’s GDP grew by 2.9% in 2024 (Statista), outpacing the national average and solidifying its position as a business-friendly metropolis. The influx of international companies has also driven demand for premium office spaces and upscale housing, particularly in central neighbourhoods like Salamanca and Chamberí.

A Cultural Powerhouse

Madrid is home to Europe’s third largest art market, hosting global events and featuring some of the best museums in the world such as the Prado and Reina Sofia. The Prado was even the 4th most searched museum in the world in 2024 according to Google, showing its international importance. Gastronomy is another highlight, with 22 Michelin starred restaurants as well as buzzy bars and tapas spots it certainly rivals its European neighbours for variety of choice.

World Class Education

Madrid is home to some of the world’s most prestigious educational institutions, making it an attractive destination for families. La Moraleja has the biggest concentration of private schools per square kilometre in Europe, including Runnymede College (British) who have built a new building to have space for the increasing demand. This inevitably leads to price premiums in the areas around the schools, as HNW look to buy close to the schools. The city is also home to IE Business School, one of the best in Europe and within top ten in FT ranking globally which drives international interest to the city.

Infrastructural Improvements

The city’s metro system, one of the largest in Europe, recently underwent expansions to improve connectivity, while Madrid-Barajas Airport introduced additional international routes. These developments make the city more accessible for both residents and global investors, further fueling demand in the real estate market.

Key Real Estate Trends in Madrid

Demand for Luxury Properties in New Areas

The demand for high-end real estate in neighbourhoods like Salamanca, Chamberí, and Retiro has skyrocketed. Properties in these areas, often priced upwards of €10,000 per square meter, attract affluent international buyers seeking prime properties in prestigious locations. However, Marco Gramaglia Director Lucas Fox Madrid shares ''Whilst Salamanca and Chamberí remain popular, we are also seeing interest from luxury buyers in new areas such as Justicia and Almagro.''

Rental Market Surge

Madrid has become a rental hotspot, with prices increasing by 16.4% in 2024, reaching €18 per square metre—the highest in Spain (Idealista). This surge is fuelled by expats, students, and remote workers as well as buyers from Latin America who are considering moving to the city and want to ‘try before they buy’.

High Rental Yields and Occupancy Rates

Madrid boasts some of the highest rental yields in Spain, especially in high-demand neighbourhoods. As of Q3 2024, Madrid's average gross rental yield stands at approximately 5.30%, positioning it among Europe's more profitable capitals for property investment. Lucas Fox Madrid is also seeing an increase in buy to rent, especially from institutions such as family offices, not just inviduals.

Strong International Appeal

In the first half of 2024, Madrid attracted 67.5% of Spain's gross productive foreign investment, totalling €7.94 billion (Madrid Investment Attraction). The city has people from across the world investing and moving, from Latin America, the US, China and Europe. In fact, in the first half of 2024, Chinese buyers held the most weight (15%) of non-resident internationals buying and selling in Madrid, although this tends to be in less expensive neighbourhoods such as Usera. Buyers from Latin America and United States remain key markets in the luxury sector, as they move away from political and economic instability in their home countries (mainly Mexicans, Venezuelans, Argentinians, Colombians and Peruvians) and a stronger USD means Americans have higher purchasing power.

Competitive Pricing vs. Other European Cities

Madrid offers excellent value for money compared to cities like Paris, London, and Berlin. Despite recent price hikes, prime property prices in Madrid remain lower than in these capitals, making it an attractive destination for savvy investors who don’t want to compromise on a cosmopolitan capital.