15% of Madrid’s ‘Prime’ Property Buyers are ForeignAccording to a recent study carried out by real estate consultants, Knight Frank, Spain’s coastal areas are no longer the sole focus of attention for international investors when it comes to purchasing property, and they are now beginning to extend their preferences to the prime locations of the country’s major cities. Thus, 15% of buyers of prime properties in Madrid are now foreigners, according to the consultants’ Prime Residential Report 2014.
The cumulative price adjustment of 40% over the past seven years is the principal attraction for international investors, who come mainly from South America, Europe, Asia and the Middle East.
Madrid is the city that arouses the greatest interest amongst foreign buyers, according to the report, and hence leads the ranking of cities with most activity in the development and commercialisation of new and luxury residential projects.
As for preferences, the buyers – both national and international – are looking for homes located in the most central areas of the capital, with high levels of services and the most affordable price per square metre. More than 50% of the enquiries are for properties in the districts of Salamanca, Jerónimos, Chamberí and Justicia.
This surge in property purchases in prime locations, however, has meant that the available supply is less than the demand, which could lead to a slight price increase in the short term. The supply of new housing is also scarce and, in fact, only 9% of the transactions closed in 2013 were of new construction.
The investment funds, hedge funds and institutional investors are also considering property acquisitions in Madrid, seeing opportunities for higher returns on investments.
In recent months, transactions worth more than 170 million euros have been registered, representing 70,000 square metres in assets.
Knight Frank believes that the prime property market bottomed out during 2013, bringing to an end the price adjustments. They predict that the housing market will stabilise this year and that sales will be maintained thanks to the ‘golden visa’ for foreign buyers and tax incentives approved by the Government for local demand. However, the report points to the restrictions in mortgage lending as one of the main factors continuing to strangle the activity in the real estate market.
Knight Frank predicts a recovery in the sector in 2014, which is already effective in the most exclusive districts, with a recovery in prices of 5%.