Authored by the expert who managed and guided the team behind the Spain Property Pack
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What will happen in Madrid’s real estate market? Will prices go up or down? Is Madrid still a hotspot for foreign investors? How is Spain’s government impacting real estate policies and taxes in 2025?
We’re constantly asked these questions because we’re deeply involved in this market. Through our work with notaries, real estate agents, and clients who buy properties in Madrid, we’ve gained firsthand insights.
That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market predictions and forecasts.
Our goal is simple: to ensure you feel informed and confident about the market without needing to look elsewhere. If you think we missed the mark or could do better, we’d love to hear your thoughts. Feel free to message us with your feedback or comments, and we’ll work hard to improve this content for you.
1) Property prices in Salamanca will stay high, but rental yields will drop as luxury homes lose appeal to investors
Salamanca's property prices are soaring, with the cost per square meter hitting €8,057 in August 2024, a jump of 19.7% from last year.
One reason for these high prices is the limited availability of new properties in the area. There's not much land left for development, and a shortage of skilled workers means fewer new homes are being built. This scarcity keeps prices high.
But owning a luxury property in Salamanca isn't cheap. Maintenance fees can top €500 a month, which is making some investors think twice. They're starting to look at more affordable neighborhoods where they can get better returns.
Rental yields in Salamanca are on the decline. There's an oversupply of luxury rentals, which means less demand for long-term leases. Even though rental prices are going up, the cost of new rental contracts is making it hard for people to afford these luxury homes.
Investors are changing their strategies. They're now more interested in stable and profitable investments rather than just prestige. This shift is making luxury properties in Salamanca less appealing.
Experts are predicting changes in the luxury property market. While population growth and low interest rates are pushing home prices up, this might not last for luxury properties, leading to lower rental yields.
Sources: The Golden Partners, Virtoproperty, CaixaBank Research, The Luxury Playbook
2) Rental yields in Arganzuela will rise significantly due to its central location and better transport connections
Arganzuela's central spot in Madrid makes it a magnet for renters craving city center access.
With new metro and bus services, Arganzuela's transport links have seen a major upgrade, making it even more appealing. The district's closeness to the Madrid Río project, which features a fresh metro line and better pedestrian paths, adds to its charm for potential renters.
The 2023 Madrid Real Estate Report shows that property prices in Arganzuela average 4,333€ per square meter, with rental yields at 6.3%. This suggests a promising future for rental income growth.
Young professionals are flocking to Arganzuela, drawn by its central location and improved transport. This demographic shift is boosting rental demand and yields in the area.
Government investments in public transport have made Arganzuela even more connected to the city center. This is expected to further increase rental yields as the area becomes more attractive to renters.
Real estate experts predict growth in Arganzuela, thanks to its strategic location and ongoing infrastructure upgrades. They often point out the district's potential for higher rental yields.
Looking at other Madrid districts like Tetuán, which saw rental yield boosts after transport improvements, gives us a historical context for Arganzuela's expected growth.
Sources: 2023 Madrid Real Estate Report, OECD Territorial Reviews: Madrid, Spain, What is causing the steady exodus of children from downtown Madrid?
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.
3) Foreign investment in Tetuán will grow as international buyers look for affordable entry into Madrid's market
The Tetuán district in Madrid is poised to see a rise in foreign investment as international buyers look for affordable entry points into the market. In recent years, property prices in central Madrid areas like Salamanca and Chamberí have been on the rise, pushing buyers to explore more affordable neighborhoods. This trend has been noted by real estate experts, who have observed increasing demand for luxury properties in new areas.
Foreign investment in Spain reached significant levels in 2023, with the Community of Madrid being a major destination for over half of this investment. This growing interest in Spanish real estate is likely to extend to more affordable districts like Tetuán. In the first half of 2024, Madrid attracted a substantial portion of Spain's foreign investment, with international buyers showing particular interest in less expensive neighborhoods.
Tetuán's relative affordability compared to other districts makes it an attractive option for international buyers. The district is also undergoing significant urban regeneration projects aimed at improving its infrastructure and amenities, which further enhances its appeal. Media coverage has highlighted Tetuán as an up-and-coming area, indicating growing interest and potential for investment.
Sources: Lucas Fox, La Cornisa de Tetuán, Invest in Spain
4) Foreign buyer interest in Madrid's Centro district will drop as prices become too high compared to other European capitals
The Centro district in Madrid is experiencing a notable rise in property prices, especially in 2024.
This increase, marked by an 11% year-on-year surge, is driven by a housing shortage and a wave of investments from Latin America. As a result, properties are becoming less affordable for many potential buyers.
In the first half of 2024, the average price per square meter for foreign transactions in Madrid climbed by 7.4% compared to 2023. This trend is making Madrid less attractive to foreign buyers who are seeking better value in other European capitals.
Meanwhile, cities like Paris are becoming more appealing due to a 7.5% reduction in property prices. This shift in affordability is drawing the attention of foreign investors looking for more cost-effective options.
With Madrid's rising costs, foreign buyers are increasingly considering other European cities where their money stretches further. The Centro district's escalating prices are making it less competitive compared to these more affordable alternatives.
As property prices in Madrid continue to rise, the Centro district may see a decline in foreign buyer interest, as these buyers seek out better deals elsewhere in Europe.
Sources: Fortune, Sur in English, WBJ
5) Energy-efficient homes in Madrid will increase as new environmental rules encourage their development
In recent years, Madrid has seen a push towards more energy-efficient residential buildings, largely due to new environmental regulations. These regulations are part of Spain's Technical Building Code (CTE), which sets high standards for energy efficiency and sustainability in construction. The CTE is regularly updated to incorporate the latest technological advancements and sustainability goals, ensuring that new buildings are designed to be as energy-efficient as possible.
Additionally, the Spanish government has been proactive in encouraging green construction through various state housing plans. These plans offer financial incentives, such as subsidies, to support energy efficiency improvements in residential buildings. This financial support makes it more attractive for developers to invest in energy-efficient technologies, like better insulation and renewable energy systems, which can significantly reduce energy consumption and costs.
Consumer demand is also playing a crucial role. Spain has become a leader in Europe for LEED-certified buildings, reflecting a strong market preference for sustainable housing. This demand is driven by a growing awareness of the benefits of reducing energy consumption and carbon emissions, as well as the financial advantages of owning energy-efficient properties, such as lower energy bills and increased property values.
Sources: Apliter, Logistic Industrial Build Madrid, Construction21
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6) More foreign buyers will focus on the Retiro area for its mix of green spaces and city life
Foreign buyers are increasingly eyeing the Retiro area in Madrid for its unique charm.
With property prices soaring in central Madrid, many are turning to Retiro as a more affordable yet equally appealing option. This area is not just about cost; its proximity to the stunning Retiro Park offers a perfect mix of green spaces and urban living, making it a hot spot for real estate investment.
Retiro Park, with its lush gardens and recreational areas, is a magnet for both locals and expatriates. The park's allure is a major reason why foreign investments in Retiro are on the rise. In recent years, a significant portion of property transactions in Madrid involved foreign buyers, with many choosing the Retiro area.
Real estate surveys show that foreign buyers love neighborhoods with parks. Retiro's blend of nature and city life is a big draw for international investors. Plus, the area is becoming even more attractive thanks to ongoing infrastructure improvements and urban development projects.
These enhancements are making Retiro more accessible and desirable, not just for residents but also for investors looking for a solid return. The combination of natural beauty and urban convenience is hard to resist, and it's clear why Retiro is becoming a top choice for those looking to invest in Madrid.
As the demand for properties near green spaces continues to grow, Retiro stands out as a prime location. Its unique appeal is set to attract even more foreign buyers in the coming years, making it a key area to watch in Madrid's real estate market.
Sources: Think Spain, Lucas Fox, The Property Finders
7) Property demand in Lavapiés will rise as it gains popularity as a cultural hotspot
Lavapiés, a neighborhood in Madrid, has been gaining attention for its cultural vibrancy, which is expected to lead to a surge in property demand. In recent years, property prices in Lavapiés have risen significantly, with a notable 9.32% increase in the Madrid housing market over the past year. This trend is particularly strong in Lavapiés due to its cultural appeal and limited housing stock.
The neighborhood hosts numerous cultural events, such as the TapaPiés festival, which attracts a large number of visitors with its diverse offerings of tapas, concerts, and parades. This annual event has become a key highlight in Madrid's cultural calendar, showcasing Lavapiés as a lively and diverse area. Additionally, the presence of art galleries and cultural institutions like Medialab Prado and La Tabacalera de Lavapiés further cements its status as a cultural hub. These venues offer workshops, exhibitions, and performances that engage the community and attract artists and creatives to the area.
Media coverage has also played a role in highlighting Lavapiés as a culturally rich neighborhood, drawing attention to its international food scene and vibrant street art culture. This media spotlight, combined with increasing foot traffic and tourism, as seen in popular spots like the Mercado de San Fernando, contributes to the growing interest in the area. Furthermore, the rental market in Lavapiés has experienced a significant jump, with rental yields increasing by 26.23%, indicating strong demand for properties.
Sources: Citylife Madrid, Culture Treasures, Lotz in Translation, Veiranda
8) Demand for studio and one-bedroom apartments will rise as more people live alone
The growing number of single-person households is a key factor driving the demand for studio and one-bedroom apartments. In recent years, statistics have shown a significant rise in single-person households, with projections indicating that by 2039, they will make up 33.5% of all households in Spain. This trend is particularly evident in urban areas like Madrid, where more people are choosing to live alone.
Urbanization trends in Madrid have contributed to this shift, as the city becomes a hub for young professionals and students. These groups often prefer smaller, more affordable living spaces, such as studios, due to their convenience and cost-effectiveness. The city's cultural renaissance has made it an attractive destination, further increasing the demand for compact living arrangements.
Additionally, consumer surveys and real estate market reports highlight a growing preference for smaller living spaces. The popularity of studio apartments is rising, driven by their affordability and the lifestyle changes that prioritize location and convenience over space. Economic factors, such as strong wage growth and slowing rent growth, have also made these smaller apartments more accessible to renters.
Sources: InSpain News, Spotahome, Business Wire
We have made this infographic to give you a quick and clear snapshot of the property market in Spain. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Demand for accessible suburban housing in Madrid will grow as the population ages
In recent years, Madrid has seen a noticeable increase in its aging population. As of 2024, nearly 20% of the city's residents were over 65 years old, and this number is expected to grow significantly in the coming years. This demographic shift is largely due to increasing life expectancy rates in Spain, which have been on the rise and are projected to continue this upward trend.
Older adults in Madrid have specific housing preferences that cater to their needs. Many prefer single-story or accessible homes to help with mobility issues and reduce the risk of falls. This preference is crucial for future housing developments, as it highlights the need for more accessible living spaces. The Madrid City Council has already taken steps to address this by launching an affordable housing project that includes features like single-story homes and other amenities tailored to older adults.
Moreover, there is a growing trend in suburban development projects focusing on accessibility. New large-scale land developments in Madrid are required to incorporate a percentage of social housing, which can be adapted for older people. This trend indicates a shift towards more accessible and age-friendly housing in suburban areas. Additionally, the suburbs of Madrid are well-connected to the city center by metro, making it easier for older adults to access amenities and services without relying heavily on cars.
Sources: Citizen Mag, Culmia, MDPI
10) Property prices in Usera will rise sharply as it becomes popular with young professionals
Usera is quickly becoming a hotspot for young professionals in Madrid.
Thanks to increased investment in infrastructure and public transport, Usera is now more accessible and appealing. This improved connectivity makes it a desirable place to live and work, especially for those who want to be close to the action in central Madrid.
Madrid's job market is booming, and youth unemployment has dropped by nearly five percent in late 2023. This means more young professionals are finding opportunities in the city, and Usera is perfectly positioned to benefit from this trend. Its proximity to the city center and its emerging status as a cultural and social hub make it an attractive option.
Usera is also seeing a rise in new coworking spaces and startups. For example, Cloudworks has set up shop in central Madrid, signaling a shift of startups and freelancers into the area. This vibrant community is likely to draw even more young professionals, increasing the demand for housing.
As more young professionals flock to Usera, property prices are expected to rise. The influx of startups and the area's growing reputation as a cultural hub are key factors driving this trend.
With its strategic location and growing amenities, Usera is set to become a prime spot for young professionals looking to settle in Madrid. The combination of job opportunities, cultural attractions, and improved transport links makes it a compelling choice.
Sources: Statista, Cloudworks, Google for Startups Campus Madrid
11) Property values in Moncloa-Aravaca will drop as families relocate to suburban areas
In Madrid, the Moncloa-Aravaca area is seeing a shift as families opt for suburban living.
Families are moving to suburbs like Arganzuela and Usera, drawn by more space and amenities that these areas offer. Arganzuela, for instance, has seen a 12% annual increase in property prices, making it a hot spot for both families and investors. This trend is reshaping the real estate landscape, with suburban areas becoming more desirable.
Improved transportation links are a game-changer, making suburban areas more accessible. Families can now enjoy the perks of suburban life without losing the convenience of city access. This ease of commute is a major factor in the growing appeal of these areas.
Central Madrid's rising living costs, including higher property prices, are nudging families towards more affordable suburban options. The cost of living in the city is becoming a significant burden, prompting many to seek alternatives that offer better value for money.
Investors are also taking note, as these suburban areas present profitable rental opportunities. The potential for quick appreciation in property values is attracting those looking to make smart investments. This influx of interest is further driving the popularity of suburbs.
As families and investors continue to flock to these areas, the Moncloa-Aravaca area is expected to see a decrease in property values. The shift towards suburban living is reshaping the real estate market, with more people prioritizing space and affordability over city living.
Sources: Indomio, The Luxury Playbook, Spain Real Estate
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12) Demand for short-term rentals in central Madrid will grow as more digital nomads move in
In recent years, particularly in 2023 and 2024, Spain has become a top destination for digital nomads. This is largely due to the introduction of the Spanish digital nomad visa, which has made it easier for remote workers to live and work in the country. The visa requires applicants to earn a substantial income, ensuring that those who come have the financial means to support themselves and contribute to the local economy.
Madrid, as the capital city, has seen a significant increase in coworking spaces, which cater to the needs of digital nomads. These spaces provide the necessary infrastructure for remote work and are often located in central areas, making them attractive to digital nomads who prefer urban living. The vibrant startup scene and entrepreneurial culture in Madrid further enhance its appeal.
Additionally, the demand for short-term rental properties in central Madrid has been on the rise. This is driven by digital nomads who prefer the flexibility and convenience of short-term rentals. Real estate market reports have highlighted this trend, showing increased demand in central locations, which is expected to continue as more digital nomads choose Madrid as their base.
Sources: Euronews, Digital Nomads World, Area Madrid
13) Property values in Chamartín will drop as new commercial projects move to different areas
In recent years, the Chamartín district in Madrid has faced challenges that could lead to a decline in property values. One of the key factors is the shifting focus of commercial developments to other areas. This trend is partly driven by the overall real estate market dynamics in Madrid, where other districts are becoming more attractive to investors.
For instance, the 2023 Madrid Real Estate Report highlighted that while Chamartín remains an attractive neighborhood, areas like Chamberí and Salamanca are experiencing significant growth. This suggests a shift in investment and interest towards these districts, potentially at the expense of Chamartín. Additionally, the data from Indomio showed that the average price for residential properties in Chamartín peaked in October 2024, indicating a possible plateau in property value growth.
Moreover, the foot traffic statistics from Placer.ai revealed a broader shift in consumer behavior by the end of 2024, favoring big-box and specialty retailers. Although this does not directly point to a decline in Chamartín, it suggests changes in retail dynamics that could impact local businesses and, consequently, property values. These factors combined with the lack of specific data on increased commercial development permits in Chamartín, hint at a potential decline in property values as new commercial developments focus elsewhere.
Sources: Madrid Real Estate Report, Investopedia, Indomio
14) Property values will rise in areas like Retiro and Casa de Campo as green spaces become key selling points
In recent years, the demand for properties near green spaces has significantly increased. Areas like Retiro and Casa de Campo have seen a surge in interest, particularly from affluent international buyers who are drawn to the luxurious lifestyle and the abundance of green spaces these areas offer. This trend has been evident since 2023 and 2024, with properties in these neighborhoods often priced upwards of €10,000 per square meter.
The rental market in Madrid has also experienced a notable increase, with prices rising by 16.4% in 2024. This growth is largely driven by expats, students, and remote workers who prefer living in areas with significant green spaces. The presence of parks and green areas not only enhances the quality of life but also makes these neighborhoods more attractive to potential renters and buyers.
Moreover, studies have shown that green spaces have a positive impact on mental and physical health. Initiatives like Madrid's Urban Forest, a 75-kilometer green ring, aim to improve ecological conditions and provide health benefits by increasing pedestrian and bicycle paths. These developments make areas like Retiro and Casa de Campo even more appealing to those seeking a healthier lifestyle.
Sources: Lucas Fox, ReSoil Foundation
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility. Finally, please note that we are not affiliated to any of the sources provided. Our analysis remains then 100% impartial.