Located at the heart of the Spanish mainland with a population of more than three million, the capital Madrid is steeped in tradition and one of the most beautiful cities in Europe. Major museums, elegant boulevards, diverse architectural styles and well-tended parks all make up Madrid’s impressive cityscape. According to the annual report of the British market research company “Euromonitor International”, Madrid was the fourth most attractive city in the world in 2022. At the same time, the cost of living in Spain’s most important cultural and economic centre is relatively low compared to other cities in Western Europe, only adding to Madrid’s appeal – especially for young people and those looking for somewhere abroad to spend a workcation. This trend had a tangible impact on Madrid’s real estate market in 2022, as Juan-Galo Macià, CEO of Engel & Völkers Spain, Portugal and Andorra, confirms: “2022 was a historic year. Even though we witnessed greater uncertainty as a result of recent years of crisis, we registered over 36,000 property transactions in Madrid – the highest figure since 2006. The low exchange rate with the Euro and the ebbing away of the pandemic have reignited the desire abroad to buy.”
According to the latest “Market Report on Real Estate in Spain and Andorra 2022/2023”, published by Engel & Völkers, property markets in Spain’s metropolitan regions are showing vitality, with price rises – and in some cases significant increases – despite rising inflation rates and interest rate hikes. Madrid, for example, saw the highest property price increases in the whole of Spain last year: the average price per square metre rose by 13 percent to 5,570 euros compared to the previous year (2021: 4,930 euros per square metre). This is the second year in a row that the capital has seen a double-digit increase (2020 to 2021: + 12 percent). “Madrid’s prices per square metre have once again reached an all-time high. This upward trend is remarkable, especially in these challenging times, and demonstrates that homes in attractive locations remain in demand and stable in value in the long term,” Juan-Galo Macià says.
One of the very good locations in the city is, first and foremost, the prestigious Salamanca district in the very centre of Madrid. With an average price per square metre of 7,662 euros, it is also the most expensive residential district in the capital. It is where the political and financial elite gravitate, and is also the preferred place of residence for Spain’s international fashion industry. The ideal listing here is a premium apartment or penthouse with some 200 square metres of living space in the immediate vicinity of the luxury fashion houses, and top prices for such homes can reach almost 14,000 euros per square metre. Salamanca is followed by the neighbouring top districts of Retiro (5,261 euros per square metre on average), Centro (5,256 euros per square metre on average) and Chamartín (5,222 euros per square metre on average).
One strong residential trend registered by Engel & Völkers in Madrid’s city centre in 2022 is the increased interest from buyers in inner-city apartments. Especially those spanning 150 square metres of living space with three rooms and a small balcony. “We are seeing huge demand for apartments in neighbourhoods close to the city centre as a result of the increased international interest. Madrid is booming and the strong interest is driving prices up, including on the rental market. The average rent in the city centre has risen by 23 percent to over 20 euros per square metre within the space of a year. This development has been spurred on by the current challenges facing prospective buyers, like more difficult lending terms,” Juan-Galo Macià reveals. The high prices dominating in central locations also meant that the surrounding Madrid region, including the Montecarmelo, Sanchinarro and Las Tablas districts, grew even more in popularity in 2022. The average price per square metre is slightly lower, at 3,144 euros, but, here too, there was a double-digit price rise of 20 percent over the previous year (2021: 2,620 euros). Madrid’s suburbs score particularly well among families as they have a broad range of expansive properties to offer, ranging from apartments with large terraces to villas with sprawling gardens.
Approximately 23 percent of the sales transactions carried out by Engel & Völkers in Madrid involved international parties, marking an increase of approx. 40 percent over the previous year. The majority of these buyers came from Mexico, France, and the USA. The number of US buyers rose particularly: In 2022, the share of US clients was at 2.12 percent and has thus grown by more than twice as much (2021: 1,09 percent). This development is due primarily to the strength of the Dollar and the historic weakness of the Euro, which fell to parity with the Dollar in mid-2022. “The low exchange rate with the Euro greatly increased the attractiveness for US buyers of investing in European real estate markets,” Juan-Galo Macià confirms, adding: “Despite the rising prices, Madrid still holds a particularly special appeal here – as both prices and the cost of living are still very competitive compared to other major European cities.” Around 60 percent of Engel & Völkers search clients last year were looking for a property in Madrid as a permanent first home, while 25 percent were seeking an investment property and 15 percent were looking to buy a second home.
For 2023, Engel & Völkers forecasts a continuation of last year’s development on the Madrid real estate market. “There are no signs at present that the current market trend is set to change in any fundamental way. In essence, demand remains higher than supply in the Madrid region. The capital is one of the most attractive regions for real estate investments in Spain. This has been reaffirmed by the strong level of domestic demand and the increased interest of foreign buyers in 2022, and it will continue to drive prices up,” says Juan-Galo Macià. He goes on to predict that: “The level of interest from international buyers will also be a fundamental pillar bringing vitality to the market this year.”