Madrid property enjoys a new reign in Spain
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Nobody goes to bed in Madrid until they have killed the night. So wrote Ernest Hemingway. In what he called “the most Spanish of all cities”, the writer noted that appointments with friends are habitually made for after midnight.
These habits remain, yet despite the Spanish capital’s reputation for liveliness, its enviable climate, wide boulevards and architectural grandeur, the city has historically been overlooked by international buyers, who tend to opt instead for Ibiza or the Costa del Sol.
But as the eurozone’s fourth-largest economy emerges from the “lost decade” that followed the financial crash, the prime property market is moving, agents report. According to the National Institute of Statistics, in the year to October 2017 sales in Madrid grew by 50 per cent. This year, sales are expected to be further buoyed by the ongoing exodus of companies and workers from Catalonia in the wake of a chaotic referendum on independence last year.
In Madrid, house prices began rising in 2014, having plunged by up to 40 per cent from the 2008 peak, according to Funcas, Spain’s savings bank foundation. In December 2016, prime property cost an average of €6,705 per square metre; by December 2017, the cost was €7,416 per sq metre, according to Knight Frank — still affordable compared with Paris and London.
“We’re seeing a strong appetite both from domestic and foreign investors,” says José Navarro, managing director of Savills’ Madrid office. “Friends, relatives and other people interested in real estate are talking about maybe changing their house, moving to a bigger flat, or even investing in a small flat to let.”
Spain’s gross domestic product is almost back at the pre-crisis level. Labour market reforms and a banking system overhaul in the wake of the crash meant that in 2015 and again in 2016 the economy expanded by more than 3 per cent, outperforming the UK, France and Germany. Forecasters expect similar growth in the year ahead, although unemployment rates in Madrid remain high, at 12 per cent.
The Madrid market has had a wave of interest from foreign investors, particularly from Latin America, who account for 18 per cent of buyers. Beyond the common language and a sentimental view of Spain as the “mother country” — and the golden visa scheme available to anyone with more than €500,000 to invest in property — buyers from countries such as Venezuela, Mexico and Colombia are drawn to the relative stability of the eurozone. “We’re seeing a different [type of] investor from four or five years ago,” says José Gregorio Faría, head of prime residential at Knight Frank. “Instead of buying a second or third home, they are bringing their families [here] because of the politics.”
The city’s most sought after district is Salamanca, to the north-east of the centre. With tree-lined avenues and some of the city’s best shops and restaurants, the area was developed in the late-19th century to accommodate the expanding populace. Bourgeois Madrileños snap up apartments around the leafy Retiro Park. A recently renovated three-bedroom apartment in a 20th-century building, a couple of blocks from the Retiro Park, is for sale through Knight Frank for €2.35m.
Further away, properties in the El Viso district are roomier; detached homes make up about a quarter of the neighbourhood’s stock. A 360 sq metre home with five bedrooms and a pool is for sale in El Viso with Engel & Völkers for €4.65m. For buyers wanting to escape the bustle entirely, a gated housing estate to the north-west of the city called La Finca is home to some of the capital’s wealthiest residents.
Outside these modern satellite communities, prime housing is mainly refurbished villas and 19th-century apartment blocks. New prime developments are fairly rare: in 2007, Spain accounted for more housing starts than Germany, France, Britain and Italy combined, a large part of the reason why the economy went bust. Today, the construction sector accounts for 5 per cent of GDP, down from 10 per cent pre-crisis.
“If you look at how many houses are being built across the country, the numbers are far below what they used to be in 2005, 2006, 2007,” says Navarro. “We don’t think this is close to any kind of bubble.” He is reassured by the fact that for the first time in about a decade, first-time buyers are making inquiries. With evident relief he says: “They’re back.”
- Overseas buyers who invest more than €500,000 in Spanish property are automatically eligible for a residency visa
- If the buyer is not an EU citizen, permission for permanent residence can be obtained by opening a Spanish bank account with more than $150,000 and owning a business
- Buying costs are typically around 8-14 per cent of the property value. Legal fees are an additional 1-2 per cent
What you can buy for . . .
€1.5m A four-bedroom flat in need of renovation in Salamanca
€5m A turn-of-the-century apartment with five bedrooms in Justicia
€10m A six-bedroom former ambassador’s residence in El Viso
More homes at propertylistings.ft.com
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