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Yes, the analysis of Madrid's property market is included in our pack
Thinking of buying a property in Madrid? You're not alone!
Many people are fascinated by Madrid's lively culture and dream of owning a stylish apartment or a historic mansion in this city.
Would it be a smart investment, though? Are property prices increasing in Madrid? Is it expensive? Is it wiser to buy property in Salamanca or Malasaña? Is there any hidden tax? Where are the best yields?
We have all the answers you need.
The Investropa team has thoroughly explored this market. As a matter of fact, we've organized all our findings in a pack. Get it now.
In the lines below, we'll share useful information and some practical tips.
How is the property market in Madrid?
When evaluating the strengths of a property market, everyone has their own opinion. We do things differently - we rely on data and actual facts.
Property types
In Madrid, there are various types of properties available for sale to meet different preferences and needs.
These include apartments, which are ideal for individuals or small families seeking convenient living in the city center or surrounding neighborhoods. For those looking for more space, townhouses and villas offer a charming suburban lifestyle with gardens and amenities.
Additionally, Madrid offers commercial properties, like office spaces and retail shops, for those interested in business ventures.
Whether you're a homebuyer or an investor, the diverse range of properties for sale in Madrid ensures that you can find the perfect fit for your lifestyle and goals.
What's better: buy or rent?
(In case you want it for yourself, not for rental purposes)
Whether you've already made Madrid your home or are contemplating it for the future, you might be considering the buy vs. rent dilemma in this vibrant Spanish capital.
Obviously, it's better to buy if you are looking for a long-term investment and a stable place to live in Madrid.
To make a good decision, look at the property price-to-rent ratio. It's like a measure of how much rental income you'll need to afford the property at its current value.
According to Numbeo, the property price-to-rent ratio in Madrid is around 20.68, which is around the world average.
In simple terms, it would typically require 21 years of rental payments, on average, to buy a property in Madrid.
Property prices in Madrid
On average, according to the last data from Ministerio de Fomento, purchasing a property in Madrid would cost you around $4,700 per square meter.
Of course, there are notable differences. The value of a square meter for an apartment in the city center of Madrid might differ from a house in Salamanca. We actually offer a more in-depth analysis in our pack for buying property in Madrid and in Spain.
To give you a sense of scale, it means that, instead of buying an apartment in Paris or London, you can become the owner of 3 properties in Madrid.
Also, housing prices in Madrid are 15% cheaper than in Barcelona.
The most expensive neighbourhoods in Madrid are probably Chamartin, Salamanca and Retiro, while the cheapest are Vallecas, San Blas and Usera.
Trends
First and foremost, we have to acknowledge that Spain offers, today, a lot of stability to investors. The last Fragile State Index that has been reported for this place is 44.4.
Don't ignore this when weighing the pros and cons of buying a property in Madrid.
Also, according to the International Monetary Fund (IMF), Spain's economy is expected to soar by 8.4% in the coming 5 years, resulting in an average GDP growth rate of 1.7%.
If you're about to invest in real estate in Madrid it's a good thing because, as the economy grows, people's incomes (usually) increase, motivating them to invest in real estate, which causes a rise in property demand and prices.
Also, in Spain, the average GDP per capita has changed by -1.1% over the last 5 years. It's a bit concerning.
Finally based on the information from the UBS Global Real Estate Bubble Index, the property market in Madrid is currently a bit expensive. The index is 0.59, which is higher than the 0.5 threshold for a market to be considered fairly priced.
Looking for more updated data? We've done a big-picture study to find out if it's a good idea to purchase property in Spain right now.
Buying property in Madrid
It can be difficult to buy property in Madrid due to the lack of reliable and up-to-date information available to buyers. That's why we have created the pack to buy property in Madrid and in Spain.
Buying process
Within our pack, we've covered the entire buying process extensively. This includes a detailed breakdown of prices and yields based on the area, advice on negotiating prices, and information about obtaining a mortgage.
Now, we're providing you with a simplified version.
This is the step-by-step process to purchase a property in Madrid:
- Obtain a Spanish tax identification number (NIE).
- Research the local property market and set a budget.
- Engage a reliable real estate agent familiar with Madrid's regulations.
- View properties that meet your criteria and align with local zoning laws.
- Conduct a thorough inspection, looking for a Cédula de Habitabilidad (occupancy certificate) and energy efficiency label.
- Make an offer to the seller, and if accepted, sign a private purchase contract (contrato privado de compraventa).
- Pay a deposit, usually 10% of the property price, to secure the property.
- Arrange financing or obtain a mortgage from a Spanish bank.
- Hire a notary public to formalize the public deed of sale (escritura de compraventa) with the seller present.
- Pay the remaining balance, plus relevant taxes such as Transfer Tax (ITP) or Value Added Tax (VAT).
- Register the property in the Land Registry (Registro de la Propiedad) to establish legal ownership.
- Obtain the updated Property Registry certificate and the keys to your new property in Madrid.
Also, if you're not from the country, you might want to check our article on how to buy property as a foreigner in Spain.
Make a profitable investment in Madrid
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Where to find a property
Discover properties in Madrid by checking out these websites:
- Idealista - A real estate platform in Spain that offers properties for sale and rent, including holiday homes. They also provide mortgage services and property-related resources.
- Fotocasa - A property portal that specializes in homes for sale and rent across various cities in Spain. They also offer mortgage and insurance services.
- Habitaclia - A real estate platform that provides properties for sale, rent, and new builds in different regions of Spain.
- Pisos - A real estate portal in Spain that features properties for sale and rent, including houses, flats, and commercial spaces.
- YaEncontre - A real estate portal offering a diverse selection of properties for sale and rent across various regions in Spain.
Also, know that we have included contacts of real estate agencies, property lawyers, moving companies, expats communities and more in our pack for buying property in Spain.
What you can get
As mentioned before, the average price per sqm in Madrid is $4,700. A 1-bedroom property with an area of 60 square meters would cost approximately $282,000, and a 2-bedroom with an area of 85 square meters would cost around $400,000.
However, property prices can vary because of their qualities and where they're located.
Property prices in Madrid's top areas are often higher. For about $890,000, you could consider a house in Salamanca, but an apartment in Chamberi might be priced at $500,000.
Yet, there are places that are easier on the wallet. You may find a residence in Carabanchel for $470,000, or a residence in Villaverde priced only at $300,000.
We give a more detailed breakdown in our full pack for buying property in Spain.
Common mistakes
Here are the main pitfalls specific to buying a property in Madrid, Spain:
- Coastal Zone Laws: Coastal properties must comply with strict regulations, and proximity to the coastline may impact construction and usage.
- Historical Property Restrictions: Owning a historic property may come with preservation obligations and limitations on modifications.
- "Cédula de Habitabilidad": Ensuring the property has a valid habitation certificate is essential for legal occupancy and resale.
- "Cláusula Suelo": Beware of mortgage contracts with minimum interest rate clauses that may lead to higher payments.
- "Patrimonio" Tax: Properties exceeding a certain value are subject to wealth tax, which can be an unexpected expense.
- "Comunidad de Propietarios": Understand the responsibilities and fees associated with the community of property owners.
- "Fianza" Deposit: Rental properties may require a significant upfront deposit, impacting initial affordability.
- "Plusvalía" Tax: Be aware of the municipal tax on increased land value during property transfers.
We don't want this to happen to you, so we have included a full checklist for your property investment in our pack of documents. Avoid these mistakes and save a lot of money.
Everything you need to know is included in our Spain Property Pack
Living in Madrid
Living in Madrid is a great experience, with a vibrant culture, exciting nightlife, and plenty of opportunities to explore the city's rich history.
Cost of living
The cost of living in Madrid is generally considered to be quite affordable. Prices for groceries and dining out are lower than in many other European cities, and rental prices are reasonable.
Here are some examples to better understand the cost of living in Madrid:
- A "caña" (small beer) at a local bar in Malasaña: $2.
- Rent for a one-bedroom apartment in Lavapiés: $900 per month.
- "Menu del día" (daily set lunch) in La Latina district: $10.
- "Churros con chocolate" at a traditional churrería: $5.
- Groceries from the "Mercado de San Miguel": $40 per week for one person.
- Ticket to a Flamenco show in the city center: $25.
- Monthly membership at a local "Polideportivo" (sports center): $40-$60.
- A bottle of "Tinto de Verano" (Spanish wine-based drink) at a terrace: $3.50.
Neighbourhoods
We want to show information in an easy-to-understand way. So, we made a table that lists the different areas in Madrid. For yields, prices and rents, check our property pack.
| Neighborhood | Description | Strengths | Weaknesses |
|---|---|---|---|
Neighborhood 1 | Neighborhood 1 is a vibrant area with diverse communities and a bustling commercial center. | Rich cultural events, numerous dining options, and excellent public transport connectivity. | High crime rates, limited green spaces, and increasing housing costs. |
Neighborhood 2 | Neighborhood 2 is a peaceful suburban area with tree-lined streets and family-friendly amenities. | Safe environment, top-rated schools, and proximity to parks and recreational facilities. | Lack of public transportation options, limited nightlife, and lower job opportunities. |
Neighborhood 3 | Neighborhood 3 is an up-and-coming district with a thriving arts scene and trendy cafes. | Artistic atmosphere, affordable housing, and a growing entrepreneurial community. | Limited parking, gentrification concerns, and occasional traffic congestion. |
Neighborhood 4 | Neighborhood 4 offers a mix of historic charm and modern amenities, with beautiful architecture and vibrant street markets. | Unique architecture, lively markets, and a sense of community. | Parking challenges, limited green spaces, and noise pollution. |
Neighborhood 5 | Neighborhood 5 is a trendy and upscale area known for its luxury boutiques, high-end restaurants, and exclusive nightlife. | Prestigious reputation, upscale amenities, and proximity to major landmarks. | High cost of living, traffic congestion, and limited affordable housing. |
Life in Madrid
Madrid is the economic center of Spain and is home to a large number of multinational companies. It has a diverse economy with a large service sector, as well as a growing technology and tourism industry.
According to the IMF's data, Madrid's GDP constitutes nearly 20% of Spain's GDP. That's a good thing, cities with strong economies often offer a steady influx of job opportunities, making property ownership a wise investment.
What expats usually like the most in Madrid is the vibrant nightlife and the delightful cuisine. They also appreciate the city's rich cultural heritage, with its many museums, galleries, and monuments.
Another great point to note is that Madrid is a safe city, with a crime index of only 28, which is a really good score. Most crimes are minor crimes.
A good point for a property investor - Madrid has an extensive public transportation system including a metro, regional rail, light rail, and bus network.
Access to healthcare in Madrid is more than excellent, with a Healthcare Index of 80. A good healthcare system will always make a place more attractive, which is positive for real estate.
Finally, it is worth noting that Madrid has two good universities: the Autonomous University of Madrid and the Complutense University of Madrid.
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Renting out in Madrid
This section is for you if you're interested in purchasing property not for personal residence, but rather for the purpose of renting it out to generate rental income.
Long-term
Tenant Profiles in Madrid
According to the data reported by Wikipedia, the home ownership rate in Spain is 76%, which is average.
It means that, if you decide to buy and rent out in Madrid, there will be a good number of people who can become your potential tenants.
If you decide to buy and rent out to long-term tenants, you should target young professionals, students, and expats looking for a place in the city center. For short-term rentals, tourists and business travelers are the main target.
Here is a little summary table we've made for you.
| Property type and area | Profiles of potential tenants | What they are looking for | Expected monthly rent in $ |
|---|---|---|---|
Apartment in Salamanca | High-income professionals | Prestigious area, upscale amenities | $1,200 - $2,500 |
Studio in Malasaña | Young adults, artists | Bohemian neighborhood, vibrant nightlife | $600 - $1,200 |
2-Bedroom Flat in Chamartín | Families, expats | International schools, transportation | $900 - $1,800 |
Penthouse in Retiro | Well-off retirees | Near parks, cultural attractions | $1,500 - $3,000 |
Apartment in Lavapiés | Students, young professionals | Multicultural neighborhood, affordability | $500 - $1,100 |
1-Bedroom Flat in La Latina | Local and international singles | Historic charm, tapas bars | $700 - $1,300 |
Townhouse in Pozuelo | Upper-middle-class families | Suburban living, private schools | $1,200 - $2,800 |
Rental yields
Nowadays, rental yields in Madrid are usually below 5%. It's not much. A good rental yield is usually around 7% or higher. Maybe, you knew it already.
The best rental yields in Madrid can be found in areas with high population density, such as the city center and popular neighborhoods like Lavapies and Malasaña, due to the high demand for rental properties in these areas. Additionally, properties with multiple bedrooms and bathrooms tend to have higher rental yields since they can be rented out to multiple tenants.
For further explanation and a more detailed breakdown, you can check the reports and analyses we have made.
Finally, be aware that rental incomes in Madrid are taxed at 19%, which is rather good.
Short-term
You could also decide to rent short-term to tourists looking for a place to stay during their visit to Madrid, or to business travelers needing a place to stay for a few days.
If you decide to go with that option, look for properties in the central areas of Malasaña, Chueca, and Sol. These areas are known for their lively nightlife and great restaurants, so they tend to attract a lot of short-term visitors.
You will have some competition though - there are around 18,000 Airbnb listings in Madrid. The average daily rate stands around $127.
You have the opportunity to generate a nice additional income stream then. According to online testimonials and analytics platform like AirDNA, Guesty and Inside Airbnb, people who offer short-term rentals in Madrid can make around $2300 per month. Also, the average occupancy rate is estimated at 80%.
Is it worth buying real estate in Madrid then?
Buying a property in Madrid can make sense, but it's not a blanket recommendation. If you're planning to settle down in this vibrant city for the long haul, purchasing a property can be a savvy move. It offers stability and potential savings compared to renting, given Madrid's moderate property price-to-rent ratio.
However, be strategic about where you buy, as property prices vary significantly across neighborhoods. If you're eyeing upscale areas like Salamanca, prepare to pay more, while neighborhoods like Carabanchel offer more budget-friendly options.
Investors should approach Madrid's property market with caution. While Spain's economy is expected to grow, signaling potential for property appreciation, Madrid is currently considered a bit expensive according to the UBS Global Real Estate Bubble Index.
Rental yields are generally below 5%, which may not be as attractive as in other markets. However, the 19% tax rate on rental income can be favorable for property investors.
Ultimately, buying in Madrid can be a smart move for those looking for long-term stability and a permanent residence. But for investors, careful research, neighborhood selection, and consideration of rental strategy are essential to make it a worthwhile venture.
Make sure you understand the real estate market in Madrid
Don't rush into buying the wrong property in Spain. Sit, relax and read our guide to avoid costly mistakes and make the best investment possible.
The content provided here is for informational purposes only and does not imply endorsement or advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information, including text, images, links, or other elements in this material. Following the content and analyses presented here does not assure specific outcomes. For guidance tailored to your individual circumstances, it is recommended to consult with a professional, such as a lawyer, accountant, or business advisor.