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The property prices in Madrid will rise by 4% in sales and 7% in rentals

El precio de la vivienda subirá en Madrid el 4% en compraventa y el 7% en alquiler 

• The strong residential property demand extends to all districts of the capital and strengthens as the main engine of the real estate market in 2017
• Engel & Völkers predicts a big wave of new-build developments in peripheral areas as well as property renovations in the centre
• Recoletos, Almagro, El Viso, Jerónimos and Justicia are the most expensive neighbourhoods in Madrid, with average prices exceeding 5,000 euros / sqm

The improvement of the economy, the normalisation of prices and the interest from investors due to low mortgage rates and deposit payments have drawn a positive scenario for the real estate industry in the recent years. In 2017, despite the expected economic slowdown, the market will continue to grow as it's supported by the strong residential property demand.

This is one of the conclusions from the Market Report Madrid 2017, prepared by the German firm, Engel & Völkers, which predicts a wave of new-build developments during this year following the rebound that was experienced in 2016. This trend will take into account the large new developments in surrounding areas as well as renovations in the centre of the capital.

The report, which is presented today by Paloma Pérez Bravo, general director of the Metropolitan Market Center (MMC) at Engel & Völkers in Madrid, points out that, in terms of prices, the scarcity of supply in certain areas will cause "increases of around 4% In sales and 7% in rentals".

If by 2015 the most premium districts were the main players, the biggest price increases during 2016 have occurred in other more popular areas. "A very positive sign of a sustainable recovery", according to Perez Bravo, who points out that "Universidad, Delicias, Lista, and Ciudad Jardín are the neighbourhoods where double digit growth has been recorded."

One of the areas that has acquired a rising prominence has been the historic colony of Fuente del Berro. This oasis consisting of 184 semi-detached houses built at the beginning of the last century and hidden behind O'Donnell and Doctor Esquerdo streets, has become a highly desirable place for both families and young professionals.

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Engel & Völkers predicts that the strong demand in these 200-300 sqm single-family homes with prices around 1 million euros, could boost prices by 15% in the fashionable district of Retiro. This is an increase that would add to the 7% rebound already experienced in 2016.

Retiro, Salamanca and Centro maintain their leadership as the most prestigious districts of the capital. Within them, the neighbourhoods of Recoletos, Justicia, and Jerónimos, with prices that exceed 8,000 euros / sqm in the most exclusive houses, are still the favourite of wealthy Spanish families and foreigners who, due to job transfer or investment purposes, want to enjoy an area that's full of unique buildings.

However, the maximum prices for these areas are still below the district of Chamartín, where such exclusive properties can reach prices as high as 15,000 euros / sqm in one of the most attractive areas of the capital, El Viso. Also exceeding the 10.000 euros / sqm are the most exclusive houses in Almagro neighbourhood and the sought-after areas of Piovera and Conde Orgaz.

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Los barrios más caros de Madrid

Promociones significativas de obra nueva comercializadas en Madrid por Engel & Völkers
Precios de alquiler por metro cuadrado 

The high demand for new-build homes 

2016 has been the year of construction with new real estate projects emerging in the big Spanish cities. Permits for building properties have risen steadily through three consecutive years and just in Madrid alone, there has been an increase of 38.77% in the first ten months of the year. This increase, together with the 44% rise in other areas with new-build developments has resulted in 15,391 new homes, of which 14,111 will be new and 1,280 will be through renovations. 

While real estate renovation grows in double digits, the current supply still does not meet the high demand for housing in prime areas. This in turn pushes up the cost of financing for the property that requires renovation. The American, British and German investors are, along with the wealthy Latin Americans, the most active investors in renovation properties, whom, over the last few months, have formed several joint business ventures with local developers.

An interesting factor is the change of the national buyer's profile. If during the past few years the real estate client was a young buyer (born in the last years of the baby boom) looking for his or her first home, he or she is now looking to move to a new property.

This new demand, called the senior boom, is generated by families with grown-up children who no longer live at home and are looking to downsize and move to a smaller property in a good location. To meet this new demand, Engel & Völkers has launched several new property construction offers that have seen price increases of 7.8%. This trend is set to continue for the next fiscal year.

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The rental market, a segment that does not stop growing

The rental market has become one of the main pillars of recovery in Madrid's real estate sector. The flexibility provided in the lease agreements, the change in mentality and the high profitability offered to the owner have all contributed to the increasing demand for property rentals at Engel & Völkers.

Buying a flat to rent out in the most demanded areas means a profitability around 5%. This profitability level has not been seen since the real estate bubble a few years ago and it even surpasses other financial assets.

This is precisely why Engel & Völkers focuses its property rental operations in the four most sought after districts of the capital: Centro, Chamartín, Chamberí and Salamanca. While in the first district, the profile of the tenant is drawn up by young couples, singles and tourists who rent small and well-connected apartments. In Chamartín, the larger-sized homes are preferred by families, both Spanish and foreign as they are attracted by the wide range of quality school offers from this district.

Most of the property rentals in Salamanca and Chamberí focus on 100-150 square metre apartments that are in high demand by young families or business executives who value these two districts' excellent transport infrastructure and commercial services.

News published in the following newspapers:

Expansión | El ABC | La Vanguardia | El Economista | Invertia | Inversión y Finanzas | El Día | El Diario Vasco | Hoy | El Diario Montanés El Confidencial | Sur | Observatorio Inmobiliario | Real Estate Press | Madrid Actual | La Verdad | Las Provincias | La Información | Gente de Madrid | La Voz Digital

Engel & Völkers

Madrid
Génova, 27 - 5th floor
28004 Madrid
Spain
Phone
+34 91 277 45 00

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