Are you thinking of buying an apartment in Madrid ? Or maybe are you just interested in knowing if it’s true that the market is going down and that they are great opportunities for apartments for sale in Madrid ?
Yes, prices are going down.
Let’s be frank: the trend is negative, even in Madrid. According to most sources, Madrid has seen a 40% decrease since the peak of the bubble in 2007, and still has to shed another 20% to reach pre-bubble prices of 2002.
The centre of Madrid is resisting the price fall compared to the rest of Spain, and will be surely one of the first market to recover.
However, negative price trends does not mean you should not consider buying. It only means there is more risk and more opportunities for buyers, since the fall is not finished and prices are open to negociation. It’s up to you, or to your buyer’s agent to get you the hidden gem at a great price.
Can you get an apartment for a fraction of its price ?
Obviously, the market has now changed from a seller’s market to a buyer’s market. You have the power.
But not the power to buy anything at a -70% price.
However, the stories on the news are always the most dramatic, and should not be taken as an example of the entire market.
The center of Madrid is still a prime location with economic growth: 2011 was a growth year still for Madrid, and May 2012 was the best year ever for tourism, with the largest number of visitors ever seen. As realtors say, “Location, location and location.”
So if you go for modern apartments in the most attractive neighborhoods of the centre of Madrid, do not expect any big discount. Expect quality properties with great environment, shops and entertainment around it, and buyers fighting to get the best priced properties.Expect to fnd a quality property you like at a price never seen since 2004 and work to get an even better price.
What kind of prices should you expect ?
Your reference should be the prices of 2002 for similar properties in the same neighborhood.
Why 2002 ? This is the year where income growth and real estate prices really disconnected. The economy has in fact come back to a size similar to 2002, and we can take 2002 as a good reference for our negociation calculations.
However, this should be our objective, but the market has not reached this level.
In the most attractive Madrid neighborhoods, we have now prices equivalent to 2004-2005. There is still some work to do to get pre-bubble prices.
Conclusion: Should you buy now ?
Yes, you should buy now if you comply with these 3 conditions :
- You want to hold for at least 5 years, either to live in it or rent it out,
- Your bank has confirmed they will give you a mortgage,
- You are ready work very hard or collaborate with a professional to find the right property, conduct a thorough negociation, check all legal issues and ensure you get a price which will enable you to see capital gain on the mid-term
Be aware that if you have the money to buy right now, you’d better leverage the fact that little buyers are on the market to seize opportunities. In 2 years when credit will flow a bit more, there will be more competition to buy and the quality properties at an amazing price will have disappeared.
Don’t let the market and the news decide for you. Take into account your personal objectives, the fiscal gains, the negociation power you have now, and prepare to negociate to get the deal you need to protect your investment.
With this article, I wanted to give answers to the typical questions all prospective buyers ask themselves.
If you want the data, research and experience behind this advice, or if you have any real estate question, send me an e-mail.
Pierre – Moving2Madrid