Authored by the expert who managed and guided the team behind the Spain Property Pack
Yes, the analysis of Madrid's property market is included in our pack
Off-plan apartment purchases in Madrid carry significant financial risks that buyers must understand before committing their deposits.
As of September 2025, Madrid's off-plan market shows strong price premiums over completed properties, with new builds averaging €6,000-€6,600/m² compared to €4,500/m² for resale properties in the same districts. While Spanish law provides deposit protection through mandatory bank guarantees, buyers still face construction delays, cost overruns, and market timing risks that can impact their investment returns.
If you want to go deeper, you can check our pack of documents related to the real estate market in Spain, based on reliable facts and data, not opinions or rumors.
Madrid's off-plan apartments command a 44% premium over completed properties, with major developments concentrated in Salamanca, Chamberí, and Retiro districts.
Spanish law mandates bank guarantees for all deposits, but buyers face construction delays averaging 6-12 months and total transaction costs of 10-15% above the advertised price.
| Risk Category | Key Concern | Typical Impact |
|---|---|---|
| Price Premium | Off-plan costs 44% more than resale | €1,500-€4,500/m² extra cost |
| Construction Delays | 6-12 month average delays | Extended holding costs, missed rental income |
| Transaction Costs | 10-15% above advertised price | €60,000-€90,000 on €600k apartment |
| Financing Restrictions | Mortgage only after completion | Full deposit payment from own funds |
| Market Timing | 2-3 year completion cycle | Potential value loss if market cools |
| Exit Flexibility | Contract assignment subject to approval | 10-15% gain or loss on early exit |
| Permit Risks | Building permits must precede sales | Total loss if permits invalid |
What's the current price difference between off-plan and completed apartments in Madrid?
New off-plan apartments in Madrid command a significant premium over completed properties in 2025.
Off-plan apartments average €6,000-€6,600 per square meter citywide, while completed properties in the same neighborhoods average €4,500 per square meter. This represents a 44% price premium for new construction.
In premium districts like Salamanca and Chamberí, off-plan prices exceed €9,000 per square meter, compared to resale properties around €6,200 per square meter. The price gap is smaller in affordable districts like Villaverde and Usera, where new builds cost €2,300-€3,500 per square meter versus €1,800-€2,800 for completed properties.
This premium reflects buyer demand for modern amenities, improved energy efficiency ratings, and the psychological appeal of owning a brand-new property.
It's something we develop in our Spain property pack.
Which Madrid districts have the highest volume of off-plan developments?
Salamanca, Chamberí, and Retiro districts lead Madrid's off-plan development activity in 2025.
These established premium neighborhoods attract the highest developer investment due to strong international buyer demand and limited existing inventory. Salamanca district shows particularly intense off-plan activity, with prices ranging from €7,000-€9,417 per square meter.
Emerging districts like Tetuán and Arganzuela also show significant off-plan volume, benefiting from infrastructure upgrades and metro line extensions. These areas offer more affordable entry points at €4,500-€6,000 per square meter for new builds.
The price differences between districts are substantial - premium central areas command €7,000-€9,400 per square meter, while peripheral districts like Villaverde and Carabanchel offer off-plan properties at €2,300-€3,500 per square meter, creating a €5,000+ per square meter gap across the city.
How reliable are Madrid's major developers in completing projects on time?
Madrid's established developers like Aedas Homes and AQ Acentor have strong track records, but delays remain common across the industry.
Major developers with proven portfolios generally maintain better delivery schedules than smaller or newer companies. These established players have experience managing complex urban projects and maintain relationships with reliable contractors and suppliers.
However, even top-tier developers face challenges with permit processing, supply chain disruptions, and weather delays. Independent legal due diligence on each specific project remains essential, as past performance doesn't guarantee future delivery schedules.
The key risk mitigation strategy involves choosing developers who provide clear escrow arrangements, detailed milestone payment schedules, and transparent project management updates throughout the construction process.
What construction delays should Madrid off-plan buyers expect?
Construction delays of 6-12 months are typical for Madrid off-plan projects as of September 2025.
Common delay causes include permit processing issues, supply chain disruptions for materials, weather-related construction stoppages, and project management coordination problems. These delays occur even with experienced developers due to factors beyond their direct control.
Delays exceeding 12 months can trigger contractual penalty clauses if properly negotiated in advance. However, Spanish courts may provide developers reasonable buffer periods for delays caused by force majeure events or administrative processing delays.
Buyers should budget for extended holding costs and delayed rental income when calculating their investment returns. The financial impact includes continued mortgage payments on bridge financing, property management fees, and opportunity costs from delayed possession.
Don't lose money on your property in Madrid
100% of people who have lost money there have spent less than 1 hour researching the market. We have reviewed everything there is to know. Grab our guide now.
What legal protections does Spanish law provide for off-plan buyers?
Spanish Law 20/2015 mandates comprehensive deposit protection for all off-plan property purchases.
All developer payments must be secured by bank guarantees or insurance policies before any money changes hands. This law requires developers to provide documentation proving deposit protection before collecting any funds from buyers.
Essential contract clauses buyers should insist on include specific delivery timelines with penalty clauses, detailed property specifications to prevent "under-building," complete planning permit documentation, and strong compensation terms for material changes or late delivery.
Buyers should engage independent legal representation to review all contracts, verify permit documentation, and ensure compliance with Spanish consumer protection laws. The contract must clearly specify all approved permits and planning documents as attachments to prevent future disputes.
How secure are buyer deposits in Madrid off-plan purchases?
Spanish law provides strong deposit security through mandatory bank guarantees or insurance policies.
Typically, buyers pay 10% of the purchase price at contract signing, with this amount fully secured by bank guarantee. Additional staged payments during construction must also be protected by the same guarantee system.
If the developer fails to complete the project, buyers can recover 100% of their deposits directly from the bank or insurance company. This legal protection is mandatory and cannot be waived or modified in purchase contracts.
The percentage at risk beyond the guaranteed amounts includes any payments made without proper security, which is why buyers must verify guarantee documentation before each payment installment throughout the construction process.
What are the total transaction costs for Madrid off-plan purchases?
| Cost Category | Rate/Amount | Example on €600k Purchase |
|---|---|---|
| VAT (New Builds) | 10% of purchase price | €60,000 |
| Stamp Duty (AJD) | 0.75% of price | €4,500 |
| Notary Fees | 0.2-0.5% of price | €1,200-€3,000 |
| Land Registry | 0.1-0.25% of price | €600-€1,500 |
| Legal Fees | 1-2% of price | €6,000-€12,000 |
| Total Transaction Costs | 12-15% of price | €72,000-€90,000 |
What financing options exist for Madrid off-plan purchases?
Spanish banks typically only provide mortgage financing after construction completion and habitation license approval.
Buyers must pay deposits and staged construction payments from their own funds, with the full mortgage released only upon property delivery and title transfer. This financing structure requires substantial liquid capital throughout the 2-3 year construction period.
Some lenders offer bridge facilities or guarantee products for high-value projects or repeat customers, but these specialized products come with higher interest rates and stricter qualification requirements.
Current mortgage rates for qualified buyers range from 2.2-3.5% fixed as of September 2025. The financing approval process requires completed property appraisal, which is impossible during early construction phases, explaining why banks defer mortgage disbursement until project completion.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Spain versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do zoning and building permits affect Madrid off-plan developments?
Major construction permits must be secured before developers can legally collect off-plan payments.
Essential permits include the building permit (licencia de obra mayor), urban viability certificate, and land zoning compliance documentation. Developers selling before obtaining proper permits expose buyers to total deposit loss and invalidated guarantees.
Red flags buyers should investigate include missing or incomplete permits, unusual zoning designations that don't match proposed construction, and lack of transparency in permit documentation.
Buyers should verify all permits directly at Madrid's Town Hall (Ayuntamiento) urban planning department rather than relying solely on developer representations. This independent verification protects against permit fraud or administrative errors that could halt construction.
It's something we develop in our Spain property pack.
What rental yields can buyers expect from completed Madrid off-plan properties?
Rental yields for new apartments in Madrid average 5.1% as of September 2025.
Central neighborhoods command rents of €18-€20 per square meter per month, but lower gross yields due to higher purchase prices. Luxury properties in Salamanca and Chamberí typically generate 4.5-5.5% gross yields.
Emerging districts offer higher gross returns of 5.5-6.5% due to lower purchase prices and growing rental demand from young professionals and international workers.
Rental demand remains strong due to Madrid's housing supply shortage and continued international migration. New apartments with modern amenities and energy-efficient ratings command premium rents compared to older properties, supporting investor returns despite higher purchase prices.
How do off-plan prices compare with resale price trends over the past three years?
Off-plan prices have risen faster than resale properties, with central Madrid districts seeing up to 38% year-over-year increases.
New builds consistently command a 44% premium over resale properties due to energy efficiency, modern amenities, and buyer preference for new construction. This premium has widened over the past three years as sustainability requirements have increased.
Resale properties show slower price appreciation but offer renovation value opportunities for buyers willing to upgrade older buildings.
The main resale risk occurs if market cooling coincides with off-plan delivery, potentially leaving buyers with properties worth less than their total investment. However, strong capital gains are common in prime zones for early buyers who purchase during initial sales phases.
What exit strategies exist for selling off-plan contracts before completion?
Buyers can assign (sell) their purchase contracts before delivery, subject to developer approval and assignment fees.
Contract assignment is most common in suburban growth areas and emerging neighborhoods where speculation is higher. The process requires developer consent and often involves assignment fees of 1-3% of the original purchase price.
Early buyers typically achieve gains of 10-15% during high-demand periods, particularly if they purchased during initial sales phases with developer incentives. Losses occur if market demand cools or construction delays extend the holding period beyond 2-3 years.
Successful assignment rights must be negotiated in the original contract with minimal penalty clauses to maintain maximum flexibility for buyers who may need to exit before completion.
It's something we develop in our Spain property pack.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Madrid's off-plan market offers opportunities for investors willing to navigate construction delays, financing restrictions, and substantial transaction costs totaling 12-15% above advertised prices.
While Spanish law provides strong deposit protection through mandatory bank guarantees, buyers must conduct thorough due diligence on developer track records, permit documentation, and market timing to avoid costly investment mistakes.
Sources
- Average apartment price per sqm Madrid
- Madrid price forecasts
- Real estate in Madrid most promising property market in 2025
- Real estate development Spain
- Top real estate developers in Spain
- Off-plan flipping in Spain 2025
- Buying a new home in Spain
- Buying property off-plan Spain safely
- Purchase of a home regulation amounts paid in advance
- Cost to buy a property in Spain in 2025