Spain reclaims its status as a property hotspot
Investors are returning to Barcelona and Madrid — some of the most affordable cities in the world.
“Barcelona is the third city of Europe after London and Paris,” says Philippe Camus, the chief executive of Shaftesbury Asset Management, a company more usually associated with hotel and office investments than residential development.
The Luxembourg-based investor has acquired a 20,000 sq m plot in the Diagonal Mar district of the city and is building Antares, the first residential scheme designed by the renowned French architect Odile Decq. The scheme of 80 flats, where one-bedroom apartments cost from €1 million, will have a spa with an indoor pool, gym, cinema, large garden with a padel tennis court and a golf simulator, roof-top terrace with infinity pool, as well as a concierge and 24-hour security. “We think the development will appeal to international investors, second-home buyers as well as local buyers, especially those working in the tech industry,” Camus says.
New-build apartments are rare outside the modern beachside neighbourhood of Barcelona.
In the old town, planning restrictions are tough and the requirement to include 30 per cent social housing in developments has slowed progress. However, the city has bounced back since Catalonia’s vote for independence in October 2017 and the terrorist attack on the popular street of Las Ramblas, which dented tourism and halted home sales. The city is now thriving as a tech hub, for which it is ranked 21 in the world in the Savills Tech Cities Index. Alex Vaughan of Lucas Fox, an estate agency based in Barcelona, says: “In the wake of the failed independence referendum that calmed the market there are still some great value opportunities. There are a few high-end developments, but if you step outside of that there are affordable opportunities at €6,000 to €7,000 a square metre in the prime city centre, and you can still get about 4 per cent yield for long-term rentals. We predict that prices will stabilise, so investors still have time.”
Barcelona is one of several Spanish cities that have caught investors’ attention.
According to Sophie Chick, the head of world research at Savills, Spain offers “some of the best value prime property in the world”. The estate agency’s Spotlight on Spain report, published today, shows that the average price for prime property in Barcelona was €6,200 a square metre in June, compared with €24,200 in New York, €17,700 in London, €15,100 in Paris and €9,100 in Berlin. Other Spanish cities are equally affordable: Madrid was €7,000 a square metre, Valencia €5,000, Marbella €4,100 and Malaga €2,600. Although prices in Madrid have increased by 0.9 per cent in the year to June, they remain 11.3 per cent lower than a decade ago. Meanwhile, prime rental yields remain robust, with Barcelona offering an average of 3.5 per cent and Madrid 3 per cent. There has been a noticeable shift towards the higher end of the market. Chick says: “In Madrid and Barcelona, prime values can reach €15,000 a square metre for the highest-quality new-build apartments.” Some of this has been driven by wealthy buyers from South America, who are attracted by the country’s golden visa scheme.
The first branded residences recently launched in the country, with Mandarin Oriental announcing its first stand-alone apartment block at the top of Passeig de Gracia, Barcelona’s luxury shopping street, with one-bedroom apartments priced from €2.3 million. The Four Seasons has launched its first residential project in the Spanish capital, Centro Canalejas Madrid, where the one-bedroom penthouse costs €3.2 million. British buyers tend to be attracted more by Spain’s beach resorts than its capital city. Although Chick says: “Residential properties in Spain’s traditional resort markets have not shown the same level of recovery as Madrid and Barcelona over the past five years. However, prices have now started to grow.” Vaughan says: “The two cities I would pick out for an investment opportunity would be Valencia and Malaga.”
Valencia on the southeastern coast and Malaga on the Costa del Sol in the south are growth spots. “Price growth [in Valencia] has been slower than some other regions, with values rising 17.5 per cent in the past five years [compared with 50.1 per cent in Madrid and 40.5 per cent in Barcelona]. Yet transaction numbers have doubled, indicating an active market. Residential development activity is increasing, a sign that confidence has returned,” Chick says. Malaga has become a destination in its own right rather than merely a gateway to nearby Marbella and is garnering more interest from buyers, with property prices up 9.9 per cent over the past year. “The city’s revival, year-round tourism and residential developments are contributing to Malaga’s reputation as an attractive buying opportunity,” Chick says. Away from the mainland, the Balearics, in particular Ibiza and Mallorca, have had consistently strong property markets. Prices rose 7.3 per cent over the past year, according to Savills, although the number of sales has begun to slow due to a lack of stock. Transactions in Palma, Mallorca, fell by 6.3 per cent from January 2018 to the same time this year. Engel & Völkers, an estate agency, reports that attention has shifted to the southern corner of the island around Llucmajor, 15km from Palma airport. Christina Deutsch, a managing partner at the estate agency, says: “Over the past five years sales transactions have doubled. We also witnessed a marked increase in the average price of property, which is mainly due to limited supply along the coast and increased demand.”
Deutsch says: “In the past five years there has been a shift, with clients increasingly interested in this stretch of coastline, where they can get more for their money and still be close to Palma.”