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The house prices in Madrid will rise by about 4 to 5% in 2016

Engel & Völkers Madrid considers that the gradual recovery of the real estate sector would lessen the risk of a new bubble bursting and avoid price distortions.

• Secondly, current wheel of the housing market will see the return of real estate development.

Salamanca, Centro, and Retiro are the most popular districts, with prices reaching the 10,000 euros/m2. 

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The positive trend of macro-economic variables and housing market figures point to a gradual recovery of the sector that would lessen the risk of a new housing bubble from bursting and avoid price distortions. This is one of the conclusions of the Madrid 2016 Market Report, produced by the German firm Engel & Völkers, which notes that the stabilisation in prices in 2015 means the point of inflection prior to the rally.

Thus, the market survey submitted by Engel & Völkers Madrid points out that, with regards to prices, a good balance will dominate the outlook for this year because on the one hand, there is an existence of a large stock of housing in the hands of banks and on the other, there is an emerging shortage of supply in certain areas. "Our forecasts point to an average increase of between 4% and 5% in 2016," says Perez Bravo.

One of the main focuses of this year will be around the real estate development in the districts of Madrid where real driving force behind the sector's recovery last year makes older properties scarce. So in 2015, while the number of resale properties were increased by 37.2%, sales of new homes fell by 33.7% due to lack of supply.

The third most attractive city in Europe to invest in 

Madrid stands as the third most attractive city in Europe for investors, only behind Berlin and Dublin. This, coupled with the leadership in the creation of companies within the Spanish territory - every day some 55 new companies in the community of Madrid are created. The city has consolidated its privileged position in the market of high standing in 2015, a year marked by the return of national customer and the strong demand from the foreign buyer.

Madrid has an attractive prospect especially for expatriates who are planning their return and see it as the perfect city for its level of service, their business and good macroeconomic figures. Also for many South American investors who came from Miami, where there is a scarce stock of houses where, found an ideal alternative market in the capital. Similarly, Chinese and Europeans who invested in London have directed their attention to Madrid before the collapse of the London market.

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Justicia and Almagro, the fashionable districts

In 2016, Salamanca will share protagonism with other prestigious districts that have become as fashionable as Centro and Retiro. The strong demand caused by Centro, has made Justicia become the most expensive district and the increase in prices is even more rapid in Salamanca.

For its part, Jerónimos is not the only expensive neighbourhood retreat, but also all over Madrid is just as expensive. With a pertil of buyers composed of wealthy Spanish families and foreigners who transfer their jobs or make an investment, they want to enjoy living in large properties. Jerónimos offers apartments of up to 900 square metres and properties that reach 10,000 euros/m2.

The district of Chamartín in the capital El Viso shares the maximum prices, where the supply of representative properties between 1 to 12 million euros prevails.

Other districts that have been arousing interest in recent months include Almagro, where there have been higher transactions than Chamberí, with people paying more than 8,000 euros/m2. Given the choice the Zurbano Street is rated as one of best in Europe by the New York Times and has been one of the triggers of the rise of a district that attracts investors from Nordic countries such as Norway and Finland.

The booming rental market

Renting has become one of the main pillars of the recovery of the Madrid real estate sector. The flexibility granted by some legislative changes in lease contracts as well as the unstable job market, change of mentality and high profitability that landlords are offered has led to an increase in renting. This is according to the number of rentals offered by Engel & Völkers offices. 

You can buy a flat to rent in the most popular areas however, the supposed profitability is around 5%, which is not recorded from the years of the housing boom and levels that surpass other financial assets.

In this sense, Engel & Völkers Madrid focuses its rental operations in the four most popular districts of the capital: Centro, Chamartín Chamberí and Salamanca.

This study of the Madrid 2016 real estate market has had much impact on the Spanish press:

Engel & Völkers

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