Madrid continues to attract significant property investment

The latest research by luxury estate agency Lucas Fox has revealed that Madrid is cementing its status as a key European property investment hub.

In the Spanish capital Lucas Fox has seen its sales rise by 30%, while its total sales value increased by 170% in the year to the end of June 2017.

The profile of buyers in Madrid is also starting to change, according to Lucas Fox’s latest Market Reports for Q1 and Q2 2017. The proportion of US and UK enquiries has risen substantially – up by 108% and 57% respectively. Meanwhile, buyers from Latin America now account for almost a third (31%) of all Lucas Fox sales (up from 11%). Just below half (46%) were Spanish buyers.

The main motivation for Madrid buyers was still purchasing for investment reasons (62%), while the remaining 38% were buying homes as second residences.

The rise in Madrid’s popularity as a destination for property investment has been seen for a number of years now. The ‘Real Estate Market Trends in Europe’ report – put together last year by PwC and the Urban Land Institute – placed Madrid as the fourth best city in continental Europe for property investment, narrowly behind Berlin, Dublin and Hamburg.

Rod Jamieson, director of Lucas Fox Madrid, said of the latest findings: “The Madrid market this year has continued to follow a similar trend to 2016 with strong local and national market activity growth and increasing demand from international investors. We have seen sales transactions increase by nearly a third compared to last year and we expect them to increase fivefold by the end of the year.”

He added: “More and more international buyers are choosing the Spanish capital as the best option in which to invest their money, thanks to high potential for capital gains in the mid to long-term, excellent rental returns and the superb lifestyle on offer.”

In the year to June 2017 a 15% increase in Madrid sales was also recorded by Spain’s National Institute of Statistics, with transaction numbers now only 9% down on their peak in 2007, just before the global financial crisis took hold. What’s more, Madrid’s prime residential market is growing considerably, with the volume of sales for homes worth more than €900,000 up by 27% in 2016 – mostly down to growing interest from overseas buyers.

By the end of June 2017, prices across Madrid were up by 6% on the year before. In ultra-prime locations such as Salamanca and Chamberí – where demand is generally greater – prices have risen significantly, up by 10% and 14% respectively.

“Compared to most Northern European cities, property in Madrid still offers good value for money,” Jamieson continued. “But like Spain as a whole, the city has a 2-speed market. In some areas prices have only recently levelled out but in highly desirable areas where demand is high, there have been notable increases.

However, Jamieson does not believe that the recent price adjustments are anything to fear, insisting that they are instead ‘simply appropriate’ to current market conditions.

“In 2017 we are looking at a different set of circumstances compared to ten years ago – the construction industry represents a much lower proportion of Spain's GDP, there's more control of risk indicators and overall, investors are much better informed,” Jamieson said. “I believe that those predicting another boom and bust are wrong to do so.”