What are the best Madrid neighborhoods for property investment?

In this article you will learn what you should ask yourself to determine the best Madrid neighborhoods for your property investment. Then you will discover which neighborhoods will optimize your individual investment goals.

This article:

  1. Gives an overview of premium Madrid neighborhoods
  2. Gives expert picks of the best Madrid neighborhoods
  3. Discusses whether it is better to invest in premium neighborhoods or more up-and-coming neighborhoods
  4. Details neighborhoods where you should not buy property
  5. Gives tips for helping you to find the optimal neighborhood for your Madrid property investment

An overview of premium Madrid neighborhoods

The question we get most is: “What is the best neighborhood in which to buy property in Madrid?”

To answer this, you need to take careful stock of your budget and investment objectives.

To help you, the Moving2Madrid team has created overviews of the most popular neighborhoods. These summaries will help you discover the best neighborhoods in Madrid.

best Madrid neighborhoods, property in Madrid

Please click on the interactive map above to learn more about the indivdual neighborhoods in Madrid.

Discover our expert picks of the top neighborhoods

Best Madrid neighborhoods, property in Madrid

Premium neighborhoods are the best Madrid neighborhoods for investors that want to shield their portfolios from market fluctuations


The following are the best Madrid neighborhoods, ordered from the most to least expensive:

1. The Exclusive

2. The Hip & Trendy – The Stars for short-term rental return

3. The Contenders – For capital appreciation or smaller budgets

If you give us your budget and your investment goals, we can suggest the best Madrid neighborhoods for you, and give you a personalized estimate of your expected returns. Book a consultation today to take advantage of this offer.

Best Madrid neighborhoods, property in Madrid

Hip and Trendy neighborhoods are great options for investors targeting the short-term rental market

Should I invest in premium neighborhoods or go for a lower cost alternative?

The first thing to do is examine your budget. If you need to keep your investment under 4500€ per square meter, you should aim for the cheaper neighborhoods. If you have a bigger budget, and are focused more on return, we recommend looking for valuable properties in premium neighborhoods.

best Madrid neighborhoods, property in Madrid

If you are risk adverse, invest in a premium neighborhood

In general, premium neighborhoods in Madrid are safer investments. If rental demand softens, yields in neighborhoods like Salamanca remain relatively high because these neighborhoods are so popular. Moreover, you will be able to rent and sell your property more easily. Thus your asset will be more liquid.

Have a look at the following graph. Notice how the apartment located in the premium neighborhood of Salamanca (blue line) has half the price volatility than the apartment located in hip and trendy Malasaña (red line).

best Madrid neighborhoods, property in Madrid

Note how the apartment in Salamanca (Navas), a premium neighborhood, has half the price volatility of the apartment in Malasaña (Calle del Tesoro), a non-premium neighborhood


If you are more interested in yield, invest in an up-and-coming neighborhood

The following table illustrates the differences in  sale prices and rental yields in a premium neighborhood versus an up-and-coming neighborhood. Salamanca is the highest end neighborhood in Madrid. Arganzuela is the most economical part of the city center. Prices are from 4Q18:


Best neighborhoods in Madrid, property in Madrid

Where not to invest

We do not recommend purchasing outside the neighborhoods listed above. Our hand picked list of best Madrid neighborhoods provides opportunities for Airbnb rentals, corporate rentals and letting to locals. When it comes time to sell the property, it will appeal to locals, foreigners and real estate investors. In short, this diversity ensures your property investment will have more rental income options and ultimately, greater liquidity.

Purchasing outside of the premium areas limits your options. It is also riskier because prices are more volatile in cheaper neighborhoods. For example, in the 2008 crisis the cheaper neighborhoods were hit the hardest- particularly in the suburbs. This is because the city center has a limited supply of apartments whereas in the suburbs, there is ample space to build more housing. In fact, there is still an over-capacity of apartments in many suburbs due to past overbuild.

Conclusion: 3 tips to help you choose the best Madrid neighborhood for your investment

Experience has shown us that opportunities are not found by betting on neighborhoods, but by by targeting premium neighborhoods and then exhausting all options within these selected neighborhoods.

Depending on your  investment focus, here are three tips:

  1. If you are most focused on the safety of your investment, choose a reasonably priced premium property in one of the neighborhoods from The Exclusive Group
  2. If your primary goal is long-term capital appreciation, focus your property search in The Contenders Group.
  3. If your focus is maximizing short-term rental returns, look for a property in The Hip and Trendy Group that is slightly differentiated (has a terrace, French doors or other sought after details). This will allow it to stand out among the competition.

If you need help defining your strategy, or determining the best Madrid neighborhoods to achieve your results, don’t hesitate to contact us. We will be happy to clarify your preferred investment profile, help you choose the optimal neighborhood and devise the appropriate investment strategy.


Posted on 1 March, 2019 by Pierre-Alban Waters in Invest - How to invest - Buy, New? Start Here


2 responses to “What are the best Madrid neighborhoods for property investment?”

  1. luka zivanic says:

    Hi. Looking for a safe and solid buy to let property investment. Long term secure rental income is the aim, while ensuring to invest in a liquid property.

  2. […] We can help you with things such as optimizing your apartment budget, learning the best neighborhood for your lifestyle, or learning what to be aware of when signing rental […]

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