After a profound shakeout, the prime real estate markets of Madrid, Costa del Sol and Barcelona are starting to recover from deep lows, offering investors a unique opportunity to buy prime property in two leading European cities near bottom-of-the-cycle prices, as the upturn gets underway.
Madrid is a top European city, without question the leading city on the Mediterranean, yet prime real estate prices in Madrid are relatively very cheap by international standards.
Using Knight Frank’s Wealth Report Prime International Residential Index as a benchmark (see left, click to enlarge), Madrid would be one of the cities where you get the biggest bang for your buck, on a par with Cape Town in South Africa.
$1m USD today will get you around 200 sqm of refurbished property in Prime areas of Madrid.
As a result, prime Madrid is now a standout bargain, and foreign investors are catching on.
Whilst foreign demand for property in Madrid and Madrid is growing, domestic demand is also starting to recover as the Spanish economy picks up and banks start to lend again, focused on prime areas of Madrid and Costa del Sol, where risks are lowest.
All of which suggest we can expect the incipient housing market recovery to consolidate fastest in prime areas of Madrid, with substantial upside expectations in the next few years.
Nevertheless, it is still possible for well-connected investors with access to the best off-market deals to purchase prime buildings at a price that makes excellent risk-adjusted returns look perfectly feasible.
EXPLOITING THE OPPORTUNITY
Over the last couple of years, a good number of foreign investors have come to Madrid and Barcelona looking for bargains, only to find the market less transparent and more complex than expected. Many have left empty-handed after a frustrating waste of time, whilst never even getting near the best deals.
The reality is the best deals in Madrid, Barcelona or Costa del Sol often involve local families inaccessible to foreign investors going through superficial channels. The Spanish crisis has been grinding on for years, and these vendors need to get out of real estate and into cash, discretely if possible.
Even with access to the best deals, profound local market expertise is needed for underwriting and due diligence to avoid overpaying, or blundering into a minefield of planning and other problems.
SPANISH LOCAL TEAM
Extracting the most value from these opportunities requires an Spanish professional local team with expertise to
1) managing property,
2) optimize rents and manage tenants
3) define products for different market segments
4) project manage building works and
5) manage sales as units become available, all over a number of years
These are complex investments that require time, effort and knowhow to transform into high returns. They can also be a major headache for all but the best professionals with local knowledge and international expertise. Foreign investors should steer clear unless they want to go their hands dirty.
FIND OUT MORE
The chance to invest in prime real estate in two leading European cities at these prices won’t last long.
Vendor expectations are firming up, and prices are rising, so don’t delay if you are interested.