Family Life in Spain: Issue 4

Expat Tips for Buying Property in Madrid

by Pierre Waters Buying a propertyin Madrid is quite different from the typical process of house buying in Spain,which for many expats means purchasing something quaint and endearing on the coast.

For one, if purchasing in Madrid you will likely be buying an apartment.

Also, it’s important to realise that as a capital city, Madrid has some of the most expensive real estate in Spain, and certain areas of the city are far pricier than other areas. Overall though, real estate market trends for 2012 reveal that average home prices in Madrid will fall another 20%, at least between 2012 and 2014, after having already dropped by an average of 20% since market highs recorded in 2007.

In short, the current market is full of opportunities: - For investment : banks and individuals are cutting prices to up to 70 % - To buy-to-rent : the rental market is going up while purchase prices are going down - To buy to live in the long term: if you negotiate well, the prices are due to go back up at a steady rate starting in 2014, and the Madrid market is already recovering in some neighbourhoods. Thus, even if you want to sell down the line, you may be able to do so for a large profit.

The market being full of risk and opportunities in Madrid, I recommend you follow these tips: -Beware of the market variations in Spain, and buy now only if you plan to hold the property for more than a minimum of five years. It’s helpful to use the New York Times calculator to evaluate the minimum number of years you need to hold before selling in order for buying to be a better financial option than renting: http://www.nytimes.com/interactive/business/buy-rentcalculator.html -Be aware that on top of the price, you will have to pay either 7% for second-hand (“Patrimonial Transmission Taxes) or 4% (VAT)for newly built properties. Additionally other legal and administrative expenses related to the purchase and the mortgage will amount to costs equivalent to 1 to 3%