Residential ‘Prime’ Market Outlook
Population growth in Spain over the last three years (+900,000 inhabitants vs. FY2018) continues to put upward pressure on demand for residential assets, especially in Madrid and Barcelona, where foreign demand keeps on thriving.
Madrid continues to lead in terms of transaction volume with c.+12,026 newly-built homes in FY2021, representing a share of c. 21%. Barcelona, on the other hand, gives up the second position in the transactions ranking in favour of Málaga, which now has a share of c. 9% of residential assets transactions.
Residential living transactions experienced solid growth in FY2021 (+39% vs. 2020) but the number of mortgages (417,501 in FY2021) did not respond the same way, only increasing by c.23% over the same period of time.
This is mainly due to the tightening of credit access conditions by banks, although the tap has not been turned off. Banks have increased pre-commercialisation requirements, reducing funding levels (including the land tranche) and increasing spreads, in short, anticipating a higher risk of subrogation for future clients.
In comparison to the Spanish national average rents (€904 for apartments and €1,860 for multi-family), Madrid ranks well above, with rents at €1,292 (c.€14.8/s.q.m.) for apartments and €3,650 for multi-family homes. The most prime areas in the city of Madrid are Jerónimos, Castellana, Universidad, Justicia and Recoletos. The Salamanca neighbourhood (where Recoletos is in) is ranked 1st with rents c. 20.6 €/s.q.m./month (+5.6% vs. FY2021) and a sale price of €9,000/s.q.m.
Looking forward, we also should not lose sight of major urbanistic projects such as the “Madrid Nuevo Norte” (formerly known as “Operación Chamartín”). Of all its ambitions, it intends to build the equivalent to the London financial “city” in Madrid and become Spain´s main business district with the construction of €1.5million s.q.m of office space, and 10,500 apartments. It will also reform the Chamartín train station, generate over 250,000 jobs and be home to the tallest skyscraper in Spain (+70 floors). Around 800 million will be invested in the project, and the adjacent residential area is expected to rise.