Madrid Real Estate Report: First half 2019
Read our 1H2019 Madrid real estate report to see early data on how Madrid real estate in 2019 is performing.
We discuss four topics in this report:
- Real estate prices in Madrid
- Pricing trends in Madrid neighborhoods
- Madrid rental market overview
- News and trends affecting Madrid real estate
1–Real estate prices in Madrid
After the strong price appreciation seen in the Madrid real estate market in 2017-2018, many speculated that the market was experiencing a price bubble. Our 1Q2018 Madrid Real Estate Report argued that we were not experiencing a bubble. Rather, we asserted that the Madrid market is undergoing significant structural change.
Early data on Madrid real estate in 2019 appears to support this case. On average, prices were flat in 1H2019.
A soft landing?
People were concerned in 2018 that the significant price increases would lead to a sharp drop in future pricing. This is the typical boom/bust cycle seen in financial markets when pricing reaches unsustainable levels.
In a maturing market that is experiencing structural change, prices don’t contract strongly after the initial appreciation. Rather, they slow their rate of change and stabilize at a higher level. This appears to be what is happening.
2– Pricing trends in Madrid neighborhoods
As usual, property prices across neighborhoods varied greatly in 1H2019. Salamanca continues to have the most expensive real estate, followed by Chamberí. Notably, prices in Chamartín continue to be strong and are now on par with prices in the Center.
We continued to see a trend of prices falling slightly in premium neighborhoods like Salamanca, and rising slightly in up and coming neighborhoods like Arganzeula and Tetuán. However, these changes were marginal. Quarterly pricing variation in Chamberí echoed that of the broader market: it was basically flat.
3– Madrid rental market overview
Rents in Madrid also appear to be stabilizing. They peaked in 3Q18 and fell the next two quarters, ticking up again in 2Q19.
What does this mean for rental yields?
Echoing the price trend, there was not much variation in rental yields. The only thing of interest is that they did fall in the Center in the 1H2019. This is likely seasonal as rents in the Center are influenced by the tourist market more than those in the rest of the city.
As rental yields in Madrid are some of the highest in Europe, this lack of variation is a good thing. As the saying goes, “If it isn’t broke, don’t fix it!”
4– News and trends affecting Madrid real estate in 2019
New mortgage laws
The biggest news is the changes to the mortgage laws. In June, 2019 the Spanish Government rolled out its long anticipated changes to the mortgage laws, aligning them with broader European legislation. The goal was to provide increased consumer protection, which is excellent news both for existing homeowners and for those seeking new mortgages.
The biggest changes are:
- Mortgage originators now pay the bulk of the fees associated with issuing a new mortgage. In the past, borrowers paid everything- notary fees, land registry fees, gestor fees and the mortgage tax. Now, banks are responsible for all of these fees. These are roughly 12.5% of the property value.
- Borrowers can be up to a year late on their mortgage payments before banks are allowed to start repossession proceedings. In the past they could repossess after two months of arrears, so this is again a very favorable development for homeowners.
- It is cheaper for borrowers to repay their mortgage early. The schedule is different for fixed and variable rate mortgages, and phases in over five years. However, after five years, there will be no fee associated with early repayment.
The above is a summary of the most material changes. For a more detailed account of the new laws, we refer you to How Spain’s new mortgage laws could affect homeowners.
EURIBOR is in negative territory
European interest rates, which Spanish mortgages are tied to, are at an all time low. This, combined with the consumer protection provided by the new mortgage laws, makes getting a Spanish mortgage an extremely attractive option. In fact, Moving2Madrid is recommending all of our clients to finance their property purchases with a Spanish mortgage. To learn more about this exciting opportunity CONTACT US TODAY.
Spain jumps in the expat league tables
HSBC publishes yearly league tables of the best countries for expats. Last year, Spain ranked 14th. This year it jumped to Number 4, behind Switzerland, Singapore and Canada and ahead of New Zealand. This is a material increase. Combined with Spain’s excellent Golden Visa scheme, it could lead to increased foreign investment in Madrid real estate in 2019 and beyond.
Spain is home to a large number of Brits. Although the future of Brexit is now even less clear, with the looming spectre of a hard Brexit, we do not expect it to materially affect the Madrid real estate market. Brits that would be discouraged from moving to Madrid due to a lack of EU citizenship tend to be lower income Brits. This demographic gravitates towards renting or buying cheap real estate on the coasts. We will keep an eye on this situation and address it in future articles.
- 1H2019 data and news all forecast that Madrid real estate will continue to be stable in 2019.
- Recent price data pointing to a soft landing is welcome news.
- New changes to the mortgage laws and the extremely low interest rates should provide soft catalysts to the market.
Moving2Madrid is a buyer’s agent that specializes in, and focuses exclusively on, Madrid real estate. We help international buyers locate, purchase, refurbish, rent and manage investment properties in Madrid. Our clients typically earn returns 50-100% above average. Arrange a FREE, PRIVATE CONSULTATION TODAY to learn how you can take advantage of these exciting trends in Madrid real estate.