As we expats wrap up 2015, it’s important to consider that it is never too late to make last year’s new year’s resolution of buying your dream home in Madrid a reality. 2016 will be a whole lot different than 2015 for sure. Clearly, this is no longer a 100% buyer’s market, and it’s getting harder and harder for the same budget to get the best.
Housing prices were recorded at a 5% increase in the 3rd quarter of 2015, which is the highest increase since 2007. It’s time to finally take the next step and invest in one of the greatest cities in the world. This is the right time to do it and here are some tips to help you navigate your way to the right deal.
- Negotiate Less: Housing prices increased by 5% in the 3rd quarter of 2015. Expect a lot of competition. Expect a buyer’s discount of 0-10% back from 10-20% in 2014-2015.
- Negotiate Faster: This is the capital city of Spain and along with Barcelona, it is the first to recover. The best properties in Madrid are rare and have many buyers interested in them. We recommend if you see something you like to move right away. Our experience is that in the past years we could spend months negotiating for a client. We now are noticing that the best properties will close for negotiation after up to 48 hours of being put on the market.
- Know your budget: Ensure that you will have the money to support you dream. The first check is to divide your maximum property price by the number of m2 you need. If you do not know how many m2 you need, a first guess is 40 m2 + 20m2 per bedroom. For instance, for a 2-bedroom apartment, 80 m2 is a good start. You will then get a price per m2. This will allow you to see what kind of neighborhoods you can afford. Be prepared to pay up to 12% in taxes and fees.
- It’s about the specific location, more than the neighborhood: Evaluate locations at a micro level, down to the block, not based on neighborhood. As another tip to get more bang for your buck, identify up and coming neighborhoods. Optimize your budget for your priority. If you want specific tips of on microneighborhoods that are up and coming and great for long term capital gains, check our selection and get in contact for updated tips (http://moving2madrid.com/best-neighborhoods/).
- Buy to Refurbish: Most buyers do not have the vision or skills to envision a refurbishment. This is where you get to opportunities others cannot leverage, and get great value. Refurbishments cost on average between 500 to 1000 euros/m2 (depending on fixtures and fittings) (http://moving2madrid.com/refurbishment/). Get recommendations from the best experts to refurbish for best value for money, not minimum cost. Contact us at firstname.lastname@example.org for updated picks of vetted experts we know.
- Know what Mortgage Options you have: If you need a mortgage, you can either request one from a bank in your country of origin with branches in Spain, or request a non-resident mortgage to a Spanish bank. For such a purchase, we recommend you go safe and standard: a 20 to 30% down payment, 30 years, and a housing-to-gross-income ratio of around 25%. General rates for non residents are 2.5-4% min: 1.7% + Euribor. Annual rates are 2.5-5%. We recommend either shorter time variable rates, or for 30 years, fixed rates. This is new and the first year we recommend this.
- View methodically. Educate yourself on what is out there. Identify value where others do not. Know what the mainstream market wants and go for what has value and what most others basic buyers don’t want. Search professionally, leveraging local network and exhausting all resources. Also, negotiate with a sound financial valuation as foundation, professional negotiation training and a deep understanding of Madrid sellers’ idiosyncrasies. Offline, get out there and get an idea of the reality vs pictures. Online, review frequently what is out there and get updated. If you are using an agent, get as much information as you can before viewing (plans, registry notes, community costs) Explain your needs clearly and keep in touch with the most proactive agents.
- Legal and administrative tasks and costs: Legal and administrative costs include fees for accounting and administrative, notary, lawyer, surveyor, deeds manager and architect. Tasks that will be included are reviewing offer and contract, obtaining required Spanish Identification (NIE) quickly to be the owner of an apartment in Madrid, checking legal background, property valuation, and conducting legal and administrative procedures to confirm the purchase of the property (http://moving2madrid.com/cost-apartment-sale/).
- Know How Much you : Current returns are at 5% per year. So for a 200,000 euro property you are guaranteed at least 10,000 euro per year. This could be between either short term or long term rentals. In the current market, you can buy to let and be profitable, in fact on average more than twice as much as in London or Paris.
- Get professional but trustworthy help: This is your biggest investment of your life in most cases. Whatever your choose, get more than friends’ tips to optimize your budget, taxes and long term return. Do the way you want to, but take your time to ensure you put the best chances on your side with someone you trust, has experience and has no interest in the seller’s side. Either a lawyer, a property hunter ideally, who works exclusively for foreigners, focused in Madrid, and who refuses to works for sellers to ensure objectivity.
So, whether you are completing your 2015 New Year’s resolution a bit late or getting a head start on 2016, these are some helpful hints on how to find the perfect investment opportunity in Madrid. We live here because we love this city. Buying a new home is like making a commitment and planting some roots that will stand a longer test of time. It never hurts to use inside experience and knowledge to your advantage especially when it comes to your dream home in Spain’s greatest city.
I hope this helped, and if you have any questions, just send us an email at email@example.com, via twitter, or even get a free consultation (http://www.meetme.so/m2mcall) to answer all your questions !