Madrid on Fine Form

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 2019 sales in Madrid grew by over 30%. House prices began rising in 2014, having plunged by up to 40% 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 2019, the cost was €7,416 per square 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.” 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%, outperforming the UK, France and Germany. Forecasters expect similar growth in the year ahead, although unemployment rates in Madrid remain high, at 12%.

The Madrid market has had a wave of interest from foreign investors, particularly from Latin America, who account for 18% 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. 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% of GDP, down from 10% 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.”