Research Primeresidential 2016
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RESEARCH MADRID PRIME RESIDENTIAL 2016 MACROECONOMIC BACKDROP | SUPPLY | DEMAND | PRICES Prime residential assets: safe haven for investors The performance of the world’s prime Prime residential assets have once again residential market is shaped by several become a safe haven for investors. At factors. This is clearly demonstrated in a time when the economy is marked by the latest Prime International Residential market volatility and negative interest Index (PIRI) figures published in The rates, the real estate sector – especia- Wealth Report. Whilst some prime lly luxury residential - has become the second-home markets such as France safest bet for investors. “Macro data and Italy were still recovering from the Whilst some real estate sectors may economic crisis, other markets such as suggests a positive be affected by Brexit, Madrid’s prime London have hit all-time highs. The good residential market will not only not be trend, but the news is that very few markets included in affected, but may in fact benefit in some the PIRI saw price falls. uncertainty brought cases if investors decide to invest in on by the lack of All the Spanish destinations included Madrid instead of London. in the index (Madrid, Barcelona, Ibiza, government cannot Although Macro data continues to outline Marbella and Mallorca) registered price a positive trend (record-breaking tou- be ignored. The increases. rist figures, excellent infrastructure and economy continues Prices in the prime areas of Madrid upbeat forecasts for job creation), the to chug along, but analysed by Knight Frank rose 3% y-o- fact remains that political uncertainty has y, testament to the sector’s modest and been hanging over Spain for 10 months stability would create stable growth. Furthermore, in line with now. Over this period, the prime resi- exponential growth”. our forecasts published in our last report, dential sector has benefited from robust Madrid’s prime residential sector has activity, largely because the economy changed significantly. The growth poten- continues to chug along out of inertia. tial in several areas of the city has now However, at Knight Frank we believe that clearly materialised, with prices now on a with a stable government, the sector’s ERNESTO TARAZONA continued upward curve. growth would turn exponential. Partner, Director Residential & Land FIGURE 1 FIGURE 2 Distribution of available stock by district (%) Distribution of available stock by type (%) 56% 39% 34% 20% 27% 16% 6% 0% 1% HABANA EL VISO CHAMBERÍ JUSTICIA SALAMANCA JERÓNIMOS 3 bedroom 4 bedroom 5+bedroom Source: Knight Frank Source: Knight Frank 1 PRIME RESIDENTIAL MADRID RESEARCH Prime residential assets: safe haven FIGURE 3 for investors Location of available stock in Madrid’s prime area The performance of the world’s prime Prime residential assets have once again CHAMBERÍ 4.8% CHAMARTÍN 6.3% SALAMANCA 6.5% residential market is shaped by several become a safe haven for investors. At factors. This is clearly demonstrated in a time when the economy is marked by the latest Prime International Residential market volatility and negative interest Index (PIRI) figures published in The rates, the real estate sector – especia- Wealth Report. Whilst some prime lly luxury residential - has become the second-home markets such as France safest bet for investors. Chamberí Ríos Rosas Castilla “Macro data and Italy were still recovering from the Guindalera Whilst some real estate sectors may economic crisis, other markets such as suggests a positive be affected by Brexit, Madrid’s prime London have hit all-time highs. The good residential market will not only not be trend, but the news is that very few markets included in Nueva España affected, but may in fact benefit in some Almagro the PIRI saw price falls. Gaztambide Arapiles uncertainty brought cases if investors decide to invest in on by the lack of All the Spanish destinations included Madrid instead of London. Hispanoamérica in the index (Madrid, Barcelona, Ibiza, Trafalgar Rercoletos Goya Fuente del Berro government cannot Although Macro data continues to outline Marbella and Mallorca) registered price Ciudad Jardín a positive trend (record-breaking tou- be ignored. The increases. rist figures, excellent infrastructure and El Viso economy continues Prices in the prime areas of Madrid upbeat forecasts for job creation), the Prosperidad to chug along, but analysed by Knight Frank rose 3% y-o- fact remains that political uncertainty has y, testament to the sector’s modest and been hanging over Spain for 10 months stability would create stable growth. Furthermore, in line with now. Over this period, the prime resi- JUSTICIA 3.6% exponential growth”. our forecasts published in our last report, dential sector has benefited from robust JERÓNIMOS 6.7% Madrid’s prime residential sector has activity, largely because the economy changed significantly. The growth poten- continues to chug along out of inertia. Margin for negociating with tial in several areas of the city has now However, at Knight Frank we believe that existing houses Ibiza clearly materialised, with prices now on a with a stable government, the sector’s Universidad Justicia ERNESTO TARAZONA Jerónimos continued upward curve. growth would turn exponential. Estrella Partner, Director Residential & Land Available stock of existing houses Niño Jesús Palacio Sol Available stock of new-builds (sqm) Niño Jesús Adelfas FIGURE 1 FIGURE 2 Embajadores Distribution of available stock by district (%) Distribution of available stock by type (%) > 10,000 sqm 3,000 sqm - 10,000 sqm 0 - 10,000 sqm Source: Knight Frank 56% 16% 39% accounted for just 30% of total supply in highlight that prime product buyers The fact that some new-build projects 99 have gone against the norm for luxury 34% Prime new-build supply El Viso: one of the most 2014, whereas this figure jumped to 60% are increasingly opting for new-builds, going on the market feature a higher than developments and gone on the market % 20% 27 in 2015. Consequently, the size of this with take-up in this segment reaching with over 40 units. 16% in Madrid has increa- average number of units is also particu- sought-after areas market has also increased, with available almost 40%. Whereas in previous years, larly noteworthy. Due to the exclusive sed for the first time on In terms of number of bedrooms, four and As the number of buyers continues to 6% supply totalling €820 million, 17% up this figure was in the region of 30%. nature of luxury projects, especially given five-bed homes account for the largest climb, so too does the number of tran- record y-oy. their architectural and technical specifi- 0% 1% With 56%, the Salamanca district accou- share of supply, representing just shy sactions. In fact, in Q1 2016, the number The major change in terms of prime pro- All aspects of the sales marketing pro- nts for the lion’s share of supply (both cations, only a limited number of units go of 80% of total supply. This is a change of transactions involving prime residential duct supply is the considerable upturn cess continue to gradually improve. new-builds and existing housing) and is on sale, in most cases no more than 15 or in trend versus previous years, when properties (both new-builds and existing HABANA EL VISO CHAMBERÍ JUSTICIA SALAMANCA JERÓNIMOS 3 bedroom 4 bedroom 5+bedroom in the amount of new-build stock com- Take-up came in at 31%, in line with the the undisputed leader in new-build pro- 20. However, complexes such as Lagasca 3-bedroom homes held more weighting. housing) rose 30% y-o-y. pared to last year. Luxury new-builds figure booked last year. We would also jects. Source: Knight Frank Source: Knight Frank 1 2 3 The confidence of those who invest in We would particularly note that pri- FIGURE 4 prime products continues to grow and ces have not fallen in any of the Preference by area (%) negotiating margins between asking and city’s districts, rising on average by closing prices, which on average barely 3%. Furthermore, in districts such as exceed 5.5%, are testament to this. Jerónimos, the y-o-y increase in new- 6% 14% builds has reached 8%. As far as existing The Salamanca district remains the homes are concerned, Chamberí and most sought-after area (39%), however Justicia have registered the sharpest interest has notably increased in the El price increases, rising 5% and 4% res- Viso district. In our previous report we 39% 23% pectively. highlighted that the profile of this area was set to rise, and we can now confirm Salamanca and Jerónimos remain the that El Viso is indeed now the prefe- most expensive areas, with average rred choice for an increasing number of prices standing at €7,800 per sqm and 3% 15% buyers, with its market share rising from €8,200 per sqm respectively. 8% to 23%. According to our forecasts, El Viso and HABANA EL VISO CHAMBERÍ Over 56% of buyers opt for homes that Jerónimos are the areas with the greatest require refurbishing, with many preferring upside potential in terms of prices, as JUSTICIA SALAMANCA JERÓNIMOS to personalise their homes with the qua- not only has demand increased in these lity materials and finishes of their choice, areas, but they have a sizeable pipeli- Source: Knight Frank and improve the property’s energy effi- ne that will come to light in the coming ciency in the process. months. In line with the trend seen last year, local FIGURE 5 Madrid will continue Existing housing 2015 vs. 2016 (€/sqm) buyers still hold more weighting (70%) than international buyers (30%). Latin to appeal Americans (Venezuelans and Mexicans) 5% Madrid will continue to climb up the ran- and Europeans are the most active king of European cities.