The vibrant culture of Madrid enchants many, prompting dreams of acquiring a stylish apartment in Spain or a historic mansion. Is this a reasonable investment? What is the current property price situation in Madrid? Our article addresses these questions and more.
Content:
- Features of the Real Estate Market in Madrid
- What is Better: Buying or Renting?
- Buying Real Estate in Madrid
- What Should Potential Buyers Be Prepared For?
- 5 Tips for Foreign Investors
- Search for Property in Madrid Exclusively on Spain-Real.Estate
Features of the Real Estate Market in Madrid
Let's examine the key aspects of the market and their roles.
Types of Properties
In Madrid, a variety of properties cater to different preferences and needs:
- Apartments: Ideal for individuals or small families seeking convenient living in the city centre or adjacent areas;
- Townhouses and villas: Offer a charming countryside lifestyle surrounded by gardens for those looking for more space;
- Moreover, Madrid can provide good returns on commercial real estate, particularly office spaces and shops.
Whether you are a homebuyer or an investor, the wide range of properties in this vibrant city ensures that you can find a unit perfectly suited to your lifestyle and goals.
Prices
On average, as per the latest data from the Ministry of Finance, purchasing real estate in Madrid will cost you approximately USD 4,700 per square metre.
Of course, there are marked differences. The cost per square metre of an apartment in the centre of Madrid will not be the same as that of a house in Salamanca. For comparison: instead of buying an apartment in Paris or London, you can acquire 3 properties in Madrid. Furthermore, housing prices here are 15% lower than in Barcelona.
The most expensive districts in Madrid are:
- Chamartín
- Salamanca
- Retiro
The most affordable ones are:
- Vallecas
- San Blas-Canillejas
- Usera
Trends
First and foremost, it’s important to recognise that Spain currently offers investors relative stability. As per the International Monetary Fund (IMF), the country’s economy is expected to grow by 8.4% over the next 5 years, resulting in an average GDP growth rate of 1.7%.
If you are planning to invest in real estate in Spain, this will play to your advantage, as a strengthening economy generally leads to increased incomes. This, in turn, motivates people to buy homes, resulting in a higher demand for houses and villas.
What is Better: Buying or Renting?
The choice between buying and renting is a common dilemma, not only for foreigners but also for residents.
Undoubtedly, if you are looking for long-term investments and hope to generate a stable income, purchasing is the better option. To make the right decision, consider the ratio of property prices to rental costs.
As per Numbeo, the price-to-rent ratio in Madrid is approximately 20.68, which aligns with the global average. Put simply, it typically takes around 21 years of rental payments to buy an apartment in the Spanish capital.
Buying Real Estate in Madrid
What does a potential investor need to know?
Buying Process
The step-by-step process of buying real estate in Madrid includes:
- Obtaining a Spanish tax identification number (NIE).
- Researching the local market and setting a budget.
- Finding a reliable estate agent familiar with Spanish legal regulations.
- Viewing properties that meet your criteria and comply with local zoning laws.
- Thoroughly check the Cédula de Habitabilidad (certificate of habitability) and energy efficiency label.
- Negotiating the final cost with the seller (contrato privado de compraventa).
- Paying a deposit (usually 10% of the property’s value) to reserve the property and prevent it from being sold to another buyer.
- Obtaining a mortgage from a Spanish bank (if necessary).
- Going to a notary to execute a public deed of sale (escritura de compraventa) in the presence of the seller.
- Paying the remaining amount and relevant mandatory fees, including the property transfer tax (ITP) and value-added tax (VAT).
- Registering the property with the Land Registry (Registro de la Propiedad).
- Receiving an updated property registry certificate and keys to your new property in Madrid.
What Can You Buy?
As mentioned earlier, the average price per square metre in Madrid is USD 4,700. A 60 square metre 1-bedroom property will cost approximately USD 282,000, while an 85 square metre 2-bedroom apartment would be around USD 400,000.
However, property prices can vary depending on their quality, location and other factors.
Real estate in prestigious areas of Madrid is often more expensive. For example, USD 890,000 could buy you a house in Salamanca, while an apartment in Chamberí might cost USD 500,000.
Nevertheless, some places offer more affordable options. For instance, you can find a residence in Carabanchel for USD 470,000 or a spacious house in Villaverde for just USD 300,000.
What Should Potential Buyers Be Prepared For?
Here are the main pitfalls associated with purchasing real estate in Madrid:
- Restrictions on buying historic properties: Ownership of such properties may entail obligations to maintain their original appearance. Therefore, significant renovations or major interior changes may not be allowed.
- Cédula de Habitabilidad: Possession of a valid certificate of habitability is necessary for lawful occupation and resale of the property.
- Cláusula Suelo: Beware of mortgage agreements containing clauses about minimum interest rates, as they can lead to higher payments.
- Impuesto sobre el Patrimonio: Properties exceeding a certain value are subject to an additional luxury tax, potentially resulting in unforeseen expenses.
- Obligations and fees associated with joining the community of property owners.
- Plusvalía tax: Be aware of the municipal tax applied to the increase in land value when transferring property.
5 Tips for Foreign Investors
Here are 5 useful recommendations to manage your finances wisely and become the owner of a property with good investment potential:
- Evaluate the market: Before you begin investing, thoroughly research the current real estate market situation in Madrid. Analyse various city districts, average housing prices and rental costs.
- Work with experienced estate agents: Investing in apartments and houses can be a complex process, especially for beginners. It‘s advisable to seek out a reliable agent who can provide advice and assistance in finding suitable properties.
- Diversify your portfolio: Consider various types of real estate investments. You can profitably buy an apartment or house for rent, invest in commercial real estate or purchase a property for resale.
- Learn about tax and legal aspects: Before investing money, familiarise yourself with tax rules and legal requirements related to purchasing and renting real estate. Consult experts in this field to obtain necessary information and ensure compliance with all legal regulations.
- Play the long game: When buying property, consider its potential for long-term growth. Explore the city’s development plans, infrastructure projects and other factors that may influence real estate prices. Invest in neighbourhoods with maximum growth potential.
Search for Property in Madrid Exclusively on Spain-Real.Estate
Dreaming of buying an apartment or house in Spain? Begin your search wisely on Spain-Real.Estate. Our catalogue of listings is regularly updated with new properties in the most picturesque parts of the country from the largest developers and verified owners.