RESEARCH

MADRID PRIME RESIDENTIAL

AUTUMN 2017

MACROVIEW SUPPLY DEMAND PRICES PRIME RESIDENTIAL , AUTUMN 2017 RESEARCH

Prime residential market GRAPH 4 MACROVIEW Europe on the up? Annual variation in prime residential property prices (%) Although prime residential property prices Spanish economic growth outstrips the were not hit so hard during the crisis, only Eurozone average, and after regaining the now are prices starting to climb. Cities such Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 positive trend seen in previous months, as Madrid (10.7%), Berlin (9.7%), Paris (8.8%) and Dublin (3.8%), have all seen consumer confidence is rising. residential property prices tick up in recent 12% months. 10% Madrid particularly stands out, registering The Spanish economic recovery remains 2017, with the percentage rising to 5.8% “Cities such as close to 11% growth in Q2. Its high quality 8% in full swing, up 3% in Q2 2017, with for existing housing. Madrid, Berlin, of life, infrastructure, physical and legal consumption, investment and foreign Paris and Dublin assurance, as well as its rich leisure, cultural 6% trade all making a more balanced Although prices are rising across the and educational offering, make it the ideal 4% contribution to growth than in pre-crisis entire country, there are still marked have all seen setting for new projects and put it on a par years. The International Monetary Fund contrasts between the Autonomous with any other major city in the world. prices for existing 2% has indicated that has made Regions. In Madrid and Catalonia, It also offers highly competitive tax and great progress in terms of its economic prime residential property maintenance advantages for new-build housing prices rose by 7.6% 0% recovery, with growth forecast to outstrip properties rise in international buyers. and 7.8% respectively over the past the Eurozone average, and the country -2% 12 months, whilst the price of existing recent months. well-poised to tackle the remaining In light of the macro data presented above, homes climbed even more, up 9.5% However, with challenges, such as reducing structural we can safely say that rather than another -4% y-o-y in Catalonia and 11.4% y-o-y in unemployment and public debt and y-o-y growth of housing bubble, Spain is in the midst of a the Region of Madrid. DUBLIN PARIS MADRID BERLIN increasing productivity. almost 11% in Q2, post-crisis expansive cycle, in which we Madrid particularly expect to see sustained growth, albeit at a Despite the fact that the country is firmly New-build housing prices in the Region more moderate pace over the next year. Source: Knight Frank Research fixed on the road to recovery and that the of Madrid have grown by 39% since stands out from deflation risk has been mitigated, inflation they bottomed out in mid-2013, with its European is yet to reach the European Central existing residential prices also growing GRAPH 3 counterparts” Index of global residential property prices Bank’s target of 2%. This, coupled with by 30.2% since the end of 2013. 55 countries tracked in Q2 2017 (%) However, current average prices are still the euro’s strength against the dollar CARLOS ZAMORA is delaying the ECB from making any unable to break above levels last seen Head of Residential decisions regarding the withdrawal of its in 2011 for both existing and new-build monetary stimulus. properties. Finland Sweden Norway Iceland Denmark Germany Estonia Spanish residential market Netherlands Russia GRAPH 1 GRAPH 2 Canada United Kingdom Latvia Lithuania New-build housing prices Existing housing prices Ireland Poland Czech Republic Ukraine (by Autonomous Region) (by Autonomous Region) Jersey In the current climate of favourable Belgium Slovakia France financing terms and conditions and low Hungary Spain Italy Romania Portugal Turkey interest rates, property investment is Variation between record low and Q2 2017 Variation between record low and Q2 2017 UnitedUnited States States Bulgaria Luxembourg Malta Greece China Cyprus Japan one of the most profitable options for Y-o-y growth rate Y-o-y growth rate Morocco Israel South Korea investors. This is therefore also driving Austria Taiwan India Croatia Hong Kong residential sales and putting upward Mexico pressure on residential market prices. 40% 40% Slovenia Switzerland Colombia Malaysia 30% 30% Sales marketing periods are decreasing % annual variation Singapore in price, Q2 2017 Indonesia and Q2 2017 saw the total number of 20% 20% residential transactions exceed 141,000, Jakarta over 20% Brazil up 14.7% y-o-y, although this is still 10% 10% considerably down on the record 251,000 10% to 20% Australia transactions registered in Q2 2006. 0% 0% South Africa 0% to 10% Chile New Zealand According to the latest data released by MAD CAT BAL CNT PVA AND CAN VAL GAL EXT MUR CLM NAV ARA RIO CYL AST MAD CAT BAL CNT CAN AND PVA VAL RIO ARA MUR NAV CYL CLM GAL EXT AST 0% to -10% the INE for the whole of Spain, new-build housing prices grew by 4.4% y-o-y in Q2 Source: Knight Frank Research | INE -10% to -20% Source: Knight Frank Research. Based on the latest available data.

2 3 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

MAP OF PRIME AREAS AVAILABLE STOCK New-build: 12.1% | Existing housing: 87.9%

CHAMBERÍ

Serrano 85

Chamberí Ríos General Oraá 9 Guindalera

Claudio Coello José Abascal 48 Nueva España Lagasca 99 Alfonso X 4 Hispanoamérica 63 Goya Serrano 141 Ciudad Jardín M. Glez. Longoria 10 El Viso Recoletos 8 Conde de Aranda 4

JERÓNIMOS

Serrano Anguita 9

Universidad Barquillo 11 Montalbán 11 Justicia Víctor Hugo 4 Jerónimos Niño Jesús Alfonso XII 64

Pacífico

Embajadores New-build developments

Source: Knight Frank

CHAMBERÍ JUSTICIA EL VISO SALAMANCA JERÓNIMOS

AVAILABLE STOCK: AVAILABLE STOCK: AVAILABLE STOCK: AVAILABLE STOCK: NEW-BUILD: 11.9% | EXISTING HOUSING: 88.1% AVAILABLE STOCK: NEW-BUILD: 11.3% NEW-BUILD: 30.0% NEW-BUILD: 2.2% NEW-BUILD: 32.6% EXISTING HOUSING: 88.7% EXISTING HOUSING: 70.0% EXISTING HOUSING: 97.8% RECOLETOS CASTELLANA EXISTING HOUSING: 67.4%

Area (Ha): 93.79 Area (Ha): 73.94 Area (Ha): 170.92 Area (Ha): 87.31 Area (Ha): 77.34 Area (Ha): 190.64 Population (1-1-2016): 19,701 Population (1-1-2016): 16,420 Population (1-1-2016): 17,018 Population (1-1-2016): 15,484 Population (1-1-2016): 16,842 Population (1-1-2016): 7,031 Density (people/Ha): 210 Density (people/Ha): 222 Density (people/Ha): 100 Density (people/Ha): 177 Density (people/Ha): 218 Density (people/Ha): 37 % from overseas: 12.2 % from overseas: 18.5 % from overseas: 11.1 % from overseas: 13.7 % from overseas: 14.6 % from overseas: 9.3 Number of households: 7,942 Number of households: 8,326 Number of households: 6,005 Number of households: 6,533 Number of households: 6,820 Number of households: 2,776 Units fronting onto the street: 1,046 Units fronting onto the street:1,712 Units fronting onto the street: 845 Units fronting onto the street: 1,382 Units fronting onto the street: 959 Units fronting onto the street: 304

4 5 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

PRIME SUPPLY “The high percentage of prestigious period buildings Almost More than Salamanca Salamanca is in Jerónimos and Más del accounts for almost the area with the The fact that prime residential properties offer 90% 70% most new-build GRAPH 8 between 200 and 600 sqm of living space, Justicia is spurring the is existing housing are 4, 5 and 6 projects Available stock by property type allows for a higher number of bedrooms per “El Viso, with a number of new full- bed homes 50% (Existing and new-build housing) of total home. wealth of single- scale refurbishment supply In fact, 4-bed properties have now replaced family properties, 5-6 BEDS projects” 3-bed homes as the most common residential 18% accounts for 25% 4 BEDS property type. 41.8% of total available 3 BEDS The number of bedrooms differs for new- 40.4% 1 - 2 BEDS supply” GRAPH 5 The super prime districts of Salamanca, for almost a third of the total supply in build and existing housing. Whereas 5 and 6 31.9% Existing housing stock available at Recoletos and Castellana account for Jerónimos and 30% in Justicia. bed-homes account for over 40% of the total 16.9% JOSÉ FARÍA Q2 2017 (%) almost 50% of total prime supply, owing This growing amount of new-build existing housing supply, they account for just Head of Prime Residential both to their size and their demographic. 16.4% housing can be attributed to the 18% of new-build home supply. However, 24.7% El Viso accounts for the second-largest 9.9% demand for refurbishment projects 4-bed prime residential properties are more 7% share and features a wealth of single- EXISTING HOUSING NEW-BUILD in these areas, as well as the lack of commonly found in new-build developments family properties, which represent a than in existing supply. 1 and 2 bed properties available existing housing. Source: Knight Frank Research quarter of the neighbourhood’s total account for almost 25% of total prime new- 27% In fact, whilst together both areas 46% available stock. Chamberí accounting for build supply, a similar percentage to the account for just 11% of total available 15% and Justicia, 8% follow in third and combined total for 1, 2 and 3 bed properties GRAPH 9 existing housing, they account for 36% Available supply by number of bedrooms fourth place. Jerónimos comes in last, in the existing homes category. with a very limited supply. of the new-build market. In the Almagro (Existing housing and new-build) 16% area, new-build and existing housing 4% In these main prime areas, the distribution account for similar percentages of the PARK IN JERÓNIMOS DISTRICT 38.9% NEW-BUILD of existing housing by area is similar to total supply. 33% EXISTING HOUSING the overall distribution, given that existing The area with the greatest number SALAMANCA - RECOLETOS AND CASTELLANA housing accounts for nearly 90% of 16.4% of new-build luxury developments is supply. 11.7% EL VISO CHAMBERÍ - ALMAGRO Salamanca. Here, there are currently Some districts, however, such as Justicia JUSTICIA JERÓNIMOS 7 prime developments with available and Jerónimos feature more new-build supply, which account for 45% of the 1 - 2 BEDS 3 BEDS 4 BEDS 5 - 6 BEDS housing than the other areas, accounting total new-build stock. Source: Knight Frank Research Source: Knight Frank Research

GRAPH 6 GRAPH 7 New-build available supply, Distribution of available supply by area, Q2 2017. Existing and new- Q2 2017 (%) build housing. (%)

SALAMANCA - RECOLETOS AND CASTELLANA EL VISO 20%

CHAMBERÍ - ALMAGRO JUSTICIA JERÓNIMOS 45% 4% 46%

15%

16% 25%

SALAMANCA - RECOLETOS AND CASTELLANA

EL VISO CHAMBERÍ - ALMAGRO 15% 8% 6% JUSTICIA JERÓNIMOS SALAMANCA DISTRICT Source: Knight Frank Research Source: Knight Frank Research

6 7 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

NEW PROJECT TRENDS

In recent years, prime residential properties have been taken to the next level. As well as basic features such as 24-hour security, multiple parking spaces per home, extensive landscaped areas, open-air courts for padel and other sports, gyms complete with spas and/or infinity swimming pools, the new projects include additional features that are revolutionising the residential market, creating innovative spaces that strongly appeal to the upper classes and more sophisticated international buyers.

GUISANDO 25 FSPRM KEY FEATURES OF NEW PRIME RESIDENTIAL PROPERTY Option for a bespoke interior design Four Seasons hotel services provided in the 22 exclusive apartments

Location Exclusivity Energy certificates This is a major Unique and bespoke LEED, BREEAM and the lifestyle-defining homes. From the recently introduced Nearly factor. Vibrant choice of layout to Zero Energy Buildings, which areas are the most the finer details of the will become compulsory in sought-after. materials used. the EU as of 2020.

SERRANO141 Designed by the acclaimed architect Rafael Robledo

Architecture Technology Security prestigious State-of-the-art systems to Installation of more Period buildings with listed ensure maximum comfort efficient access façades or unique archi- in the home: full control systems such as tectural features. Designed of lighting, temperature, facial and fingerprint by renowned architects. self-cleaning systems, etc. recognition.

Merging concepts Landscaped spaces Communal areas Integrating art with Gardens and courtyards Spacious gyms equipped architecture, or 5* featuring exotic plants, with the latest in sports hotel services in private which instils a sense of technology, cinemas, gourmet residences, creates well-being for anyone rooms, wine cellars and MONTALBÁN 11 unique experiences. passing through them. nurseries are some examples. Art and architecture are effortlessly combined via the Chromatic Ambience created SERRANO 85 by the acclaimed French-Venezuelan artist Carlos Cruz-Diez. Fully refurbished art-decó building The only initiative of its kind in Spain to date.

8 9 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

TRANSACTIONS WHO BUYS PRIME RESIDENTIAL PROPERTY?

QUALITY Salamanca remains the city’s most countries, who account for 18% and Prepared to pay “The prime residential a price that reflects CHAMBERÍ sought-after area, accounting for over 11% of demand respectively. property market has the product’s Spanish families for owner occupation and investors to let out to students and young people 60% of the prime existing residential high-end quality from overseas. property transactions in the last year. El The cultural and historical ties that Spain seen an influx of They are interested in 2-4 bed apartments, between 100 and 250 sqm that are within striking Viso is ranked second ahead of Almagro shares with Latin Americans and the international buyers, € distance of the en-vogue areas that boast rich cultural and leisure offerings. and Jerónimos. Lastly, Justicia accounts proximity and similarity in institutional especially Latin for just 3% of the total prime residential frameworks with other European countries property transactions. are both factors that increase Spain’s appeal Americans, who are EL VISO being increasingly EXCLUSIVITY as an investment options for these markets. GUARANTEE European families with children that require large apartments or houses. Domestic buyers account for two drawn to Madrid thanks They are interested in homes of more than 250 sqm that also offer generous outdoor spaces. thirds of Madrid’s prime residential As these new market players know, it is to everything it has to Foreign diplomats stationed in the city. property transactions, with a paramount that they understand today’s They select the location based on its proximity to the area with the largest number of embassies. considerable increase being seen buyers’ needs so that new developments offer” in the number of buyers from other meet their requirements in terms of JERÓNIMOS provinces, the latter also benefitting rooms and spacious layouts, high-end Spanish and Latin American families. from the Region’s tax deductions. specifications, exclusive projects offering LEISURE Highly interested However, there are a growing number state-of-the-art technology that affords the They are interested in homes larger than 200 sqm, period properties in quiet areas that are in culture, art and close to parks and areas of cultural interest. of international buyers, especially from home with maximum comfort and energy travelling Latin America and other European efficiency. JUSTICIA Young professionals, executives and investors. PERIOD PROPERTY IN CHAMBERÍ GRAPH 10 They are interested in 2-bed apartments in the region of 100 sqm that are located a short Distribution of transactions by area. distance from the city’s top leisure areas. 2017. (%) TECHNOLOGY Interested in the latest technology SALAMANCA SALAMANCA - RECOLETOS AND CASTELLANA Spanish, other Europeans and Latin Americans. They are interested in homes of between 200 and 250 sqm that are located in quiet residential EL VISO CHAMBERÍ - ALMAGRO areas, but close to the city’s most prestigious shopping areas. JUSTICIA JERÓNIMOS

ENVIRON- ORIGIN: 62% MENTALLY aware NORTH AMERICA 2%

MIDDLE EAST 2%

21% EUROPE* 11% AFRICA 1% DEMANDING With both their perso- 7% 7% nal and professional 3% environments

SPAIN 66% LATIN AMERICA 18%

*Excluding Spain Source: Knight Frank Research Source: Knight Frank Research Key buyers: Venezuela, Mexico, Switzerland and France.

10 11 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

PRICE ANALYSIS

After remaining stable for a year, The luxury residential market also In L’Eixample, a 161 sqm home can be “Spain offers GRAPH 11 existing residential property prices have continues to trend upwards across the bought for €1 million, this rises to 169 sqm Average prices in prime neighbourhoods. Existing*. excellent prime rest of the country. As well as Madrid, in Sarrià and up to 183 sqm in Barcelona’s now started to climb at a far higher rate Annual variation (%) some areas of Ibiza, Mallorca, Marbella residential investment than in previous years in all of Madrid’s old town. and Barcelona continue to register some prime areas. opportunities and is of the highest prices for prime residential 14% 2014 - 2015 2015 - 2016 2016 - 2017 Regarding other European markets, especially attractive properties out of all Spanish cities. Monaco still holds the top spot in terms of We would particularly highlight given the current 12% price per sqm, with average prices ranging Jerónimos. Here, prices remained low interest rates. Its The Es Cubells area in Ibiza holds the between €48,600 and €59,300 per sqm. largely flat last year, nudging up just 10% number one spot, where €1 million can London follows at number 2, with prices unrivalled international 0.5%, mainly due to the political buy 133 sqm. Madrid’s Jerónimos comes ranging between €27,500 and €33,600 per transport links make instability, after rising 8% in 2014 and in a close second, with the same amount 8% sqm, with Geneva’s €20,200 to €24,700 compared to the spike of over 13% buying 136 sqm, on a par with the price it the ideal country to per sqm coming in third. seen so far this year. We would also 6% per sqm in other areas of the Balearic invest in compared to highlight the increase in price per sqm Islands such as Port d’Andratx, Son Vida The price per sqm for prime residential other European cities” in the Almagro neighbourhood, where and Palma, in Mallorca, and the centre of 4% properties in Madrid stands at between the best properties have reached Ibiza. The second most expensive area is €6,400 and €7,800 per sqm, less than half €6,000 per sqm versus €5,300 per sqm 2% the Salamanca district where on average compared to cities such as Vienna, Paris last year. Prime residential properties 143 sqm of prime residential property can be bought for €1 million, however, in and Zurich. This price gap with other in the remaining areas have registered 0% specific areas such as Recoletos, this area European cities, and the forecast uplift average price increases of €500 - 550 JERÓNIMOS SALAMANCA | EL VISO CHAMBERÍ | JUSTICIA RECOLETOS ALMAGRO drops to 139 sqm. potential over the coming years, makes per sqm, up by between 8.2% in AND CASTELLANA prime residential properties in Madrid Salamanca and 10.8% in Justicia. Source: Knight Frank Research Barcelona’s most expensive area ranks extremely appealing to international at 10th in the Spanish city ranking. investors.

GRAPH 12 Average closing price. 2016 vs 2017. Existing*. (€/sqm)

8,000

7,000

6,000 2016

5,000 2017

4,000

3,000

2,000

1,000

0

JERÓNIMOS SALAMANCA | EL VISO CHAMBERÍ | JUSTICIA RECOLETOS ALMAGRO AND CASTELLANA * Closing prices for prime new-build homes are not included, as the reduced size of the sample would skew the results of the study. Source: Knight Frank Research

12 13 PRIME RESIDENTIAL MADRID, AUTUMN 2017 RESEARCH

PRICE ANALYSIS

GRAPH 13 GRAPH 14 How many sqm can I buy with €1 million? Luxury residential prices - Top European cities (sqm) (€/sqm)

PRIME AREA INDEX TOP NEIGHBOURHOODS IN SPAIN

IBIZA | ES CUBELLS - 133

MADRID | JERÓNIMOS - 136 MONACO LONDON GENEVA VIENNA PARIS EXISTING HOUSING IN PRIME €48,600 - €59,300 €27,500 - €33,600 €20,200 - €24,700 €16,000 - €19,500 €15,700 - €19,200 MALLORCA | PORT D’ANDRATX - 136 AREAS OF MADRID (SQM)

MALLORCA | SON VIDA - 137 JERÓNIMOS 136

MALLORCA | PALMA - 137 SALAMANCA* 143

IBIZA | CIUDAD - 138 EL VISO 163

CHAMBERÍ 167 ZURICH ROME BERLIN DUBLIN MADRID MADRID | RECOLETOS - 139 JUSTICIA 172 €15,300 - €18,700 €11,000 - €13,400 €9,600 - €11,800 €7,000€ - €8,500 €6,400 - €7,800

MARBELLA | MILLA DE ORO - 144

Source: Knight Frank Research MARBELLA | SIERRA BLANCA - 154

BARCELONA | L’EIXAMPLE - 161

MADRID | EL VISO- 163

MADRID | CHAMBERÍ - 167

MARBELLA | NUEVA ANDALUCÍA - 167

BARCELONA | S. SANT GERVASI - 169

MADRID | JUSTICIA - 172

IBIZA | SANTA EULALIA - 172

BARCELONA | HIST. CENTER - 183

Source: Knight Frank Research Analysis based on prestigious properties in each area. * In the Salamanca district, the Recoletos and Castellana neighbourhoods have been studied.

14 1515 PRIME RESIDENTIAL RESEARCH Carlos Zamora Head of Residential +34 600 919 041 [email protected]

José Gregorio Faría Head of Prime Residential +34 600 919 116 [email protected]

Rosa Uriol Head of Research +34 600 919 114 [email protected]

Vanesa Marcos Senior Research Consultant +34 600 919 130 [email protected]

Knight Frank Research offers strategic advisory services, consultancy services and forecasts to a wide range of clients across the globe, including private investors, developers, institutional investors, corporate institutions and the public sector. All our clients recognise the need for their company to receive independent expert advice tailored to meet their specific needs.

RECENT REPORTS

Jerónimos Snapshot Prime Global Cities Spain Insight Jewellery Special Q2 2017 Index - Q2 2017 2017 Q2 2017

Knight Frank Market reports are available at www.knightfrank.es/investigacion-de-mercados and at www.knightfrank.com/research

Important notice © Knight Frank LLP 2017 – This report is published for general information only and is not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank España, S.A.U. for any loss or damage resultant from any use of, reliance or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank España S.A.U. in relation to particular properties or projects. Reproduction of this report in whole or part is not permitted without prior written approval of Knight Frank España S.A.U. to the form and content within which it appears. Knight Frank España is a limited liability partnership registered in the Mercantile Register of Madrid with Tax ID No. (CIF) A-79122552. Our registered office is located at Suero de Quiñones 34, 28002 Madrid