If you are planning to buy an appartment in Madrid, I recommend you follow these 10 tips:
1) Location, Location, Location
Choose your neighbourhood well, and make sure it is one that suits your lifestyle and budget. Prices change considerably depending on the area in Madrid; the average price per square meter in Madrid was 3478 € as of the last quarter of 2011. Housing in the cheapest neighbourhood is about 40 percent cheaper than housing in a moderately priced (under 2000 €/m2) neighbourhood, and housing in the most exclusive area 40 percent more expensive (around 4800 €/m2).
2) Plan for extra costs for 7-12% on top of price
Be aware that on top of the price, you will have to pay first, either 6 percent for second-hand (“Patrimonial Transmission Taxes) or 10 percent (VAT)for newly built properties. Additionally other legal and administrative expenses related to the purchase and the mortgage will amount to costs equivalent to 1 to 3 percent of the property price.
For the low-down on all costs to expect: http://moving2madrid.com/cost-apartment-sale/
3) Buy & Hold
and buy now only if you plan to hold the property for more than a minimum of five years. It’s helpful to use the New York Times calculator to evaluate the minimum number of years you need to hold before selling in order for buying to be a better financial option than renting: http://www.nytimes.com/interactive/business/buy-rent-calculator.html
You can also flip now in the current market, but it needs advanced valuation and refurb skills.
4) Beware of Real estate agents
They do not work for you, but for the seller. They usually charge commission to the seller: 6 percent is the average. This is different to other parts of Spain. However, some agencies, such as Red Pisos, charge 3 percent to each party, the seller and the buyer. Just be aware that, in most cases, you will not have to pay commission, but it may occur.
5) Estimate conservatively the rental returns
Take into account that if you have a refurbished and modern flat in the centre of Madrid, you will be able to easily rent if for days or weeks to tourists for good money. This can be a good way to make extra cash while travelling, especially for expats who are planning to leave their flat empty for months.
All real estate professionals know that average advertised prices are around 20 percent higher than the final sale price. To negotiate well in Madrid, you need to be patient, have alternatives and be prepared.
7) Plan long-term if you have family or family plans
If you have kids, be aware that all quality schools are in the northern and north-western part of Madrid, which tends to be, like in nearly all capital cities in Europe, the poshest part of the city. Look at these maps to get an understanding of :
8) Either have minimum 30% down, or get the mortgage from your country
Always compare mortgages you can get in Spain to what you could get in your home country. Spanish banks are still very cautious with mortgages, and charge high interest rates.
9) Get help
you will need support, and keep in mind that real estate agents are not your friend – they only are business people working to sell houses. It’s recommended that expats use the services of a flathunter: a professional who can help get the best property at the best price. These service providers will ask for a percentage-based commission or fixed fee. Disclosure: Moving2Madrid is the one of only flathunters in Madrid and the only one focused on expats, with the lowest fee in the market (3%) and the best service: flathunting + relocation included in the same fee.
10) Get a lawyer
Finally, and just to be on the safe side of things, get a lawyer – you will need a local trustworthy lawyer to make the buying process easier and stress-free. If you use a flathunter, they should recommend a good professional from the start.
If you need help to buy the best property, do not hesitate to send us an email !
+Pierre-Alban Waters –
This post is also available in: French