Global real estate consultant Knight Frank is reporting that the average home price in Madrid declined 30% in peak-to-trough terms following the financial crisis of 2008, but now sits 46% above the market low reached in Q3 2012.
The recovery of Madrid's prime residential market gathered pace at the end of 2016 and since early 2017 Knight Frank's Madrid Prime Residential Index has outperformed our 43-city average with luxury prices accelerating 8.1% in 2018.
The volume of luxury new homes sold by the Knight Frank team increased by 50% between 2017-18 and 2018-19, with almost all of the new units launched in the last two years now under offer.
In Madrid, the upturn in the commercial sector was a precursor to the residential market's recovery. Madrid has evolved into a key business centre with a strong finance, tech, logistics and communications bias. According to the Ministry of Economy, six out of every €10 invested in Spain is invested in the capital.
Madrid is also now firmly on the tourist map with over 6.7 million tourists visiting the city in 2017. Madrid Barajas Airport operates direct flights to 203 airports globally, and passenger numbers have surged 50% since 2004, from 38 million to 57 million in 2018.
At €8,000 per sq. m not only are prime values highly competitive compared with other first tier European cities but Madrid's cost of living is low and it is ranked 46th out of 231 cities for its quality of life according to global consultants Mercer.
Traditionally, Madrid's prime markets were located across the city's northern districts such as Salamanca, Chamberi, Chamartin and El Viso.
Since 2016, more attention has been paid to central areas which takes in Sol, Embajadores and the historic heart of the city close to Plaza Mayor. Proximity to El Retiro, Madrid's 350-acre park - roughly the same size as Hyde Park - is also a key draw.
Around 65% of prime buyers originate from within Spain, either from within Madrid or from its major cities including Barcelona, Malaga and Seville. A decade ago, this figure would have been closer to 90%.
Of the city's overseas prime buyers, around 18% originate from Latin America, but unlike two years ago when Venezuelans dominated, 2018 saw Mexican purchasers increase their market share, many consider Madrid to be a safe haven, personally and financially.
In terms of buyer motives, around 50% of our prime buyers are seeking a permanent or second home exclusively for their own personal use, 22% are looking purely for a rental investment and the remaining 28% cite a mix of reasons; holiday home, rental investment and a base for their child whilst at university.
Madrid's prime residential market is now well established and a key safe-haven destination for Latin American wealth. According to the 2019 edition of the Knight Frank Wealth Report, 71% of UHNWIs in Latin America now have a second passport or dual nationality and of those considering emigrating, Spain was their preferred destination.
Of the 20 global cities we track, we expect Madrid to lead our prime residential forecast in 2019 with prices edging 6% higher in 2019.
Spain is forecast to see a 27% rise in UHNWIs over the next five years, this equates to nearly 1,100 more individuals with US$30 million+ in net assets in real terms, as well as over 62,000 more millionaires nationally. We believe that a large proportion will want a slice of the capital's luxury bricks and mortar.