Overview | Trends | Supply | Transactions | Prices Prime Residential knightfrank.com/research Research, 2020-21 Fotografía: Daniel Schafer PRIME RESIDENTIAL 2020-2021 PRIME RESIDENTIAL 2020-2021 PRIME CONTENTS RESIDENTIAL 04 OVERVIEW 08 PREMIUM HOMES FOR PREMIUM CLIENTS – SOMETHING FOR EVERY TASTE oin us as we carry out an in-depth analysis attributes that breathe life and soul into the city’s 10 J of the prime residential market, to find out trendiest neighborhoods. A STROLL THROUGH THE how COVID-19 has affected performance in this To evaluate market conditions for the city’s most CAPITAL’S TRENDIEST exclusive segment. We begin with a broad over- exclusive homes, we focused on properties valued NEIGHBOURHOODS view of the residential market as a whole, getting at over €900,000 and located in one of the city’s to grips with the latest data and venturing some main prime submarkets within the districts of projections for YE 2020 – and a few predictions Chamartín, Salamanca, Retiro, Chamberí and the for 2021. Centre. We have combed through all the latest sup- 20 Our Prime Global Forecast report paints a cheer- ply-side data, studied key indicators, like transac- OUR ANALYSIS OF THE MADRID ingly optimistic picture for the prime residential tion volume, and traced the dominant price trends PRIME MARKET market in major global cities – including Berlin, over the last four years. Paris, London and, of course, Madrid – at the close It is becoming more and more common to find of 2021. super-prime residential apartments integrated into Demand analysis has always been key to under- luxury hotels, a concept that offers owners the ulti- standing this market, and in the present circum- mate in exclusivity, comfort and privacy. A number 22 stances, an accurate grasp of buyer profiles is even of notable examples can already be seen in Spain, CAR, WHAT CAR? more important. Without it, we would struggle to such as the Mandarin Oriental Hotel in Barcelona or MADRID’S REWARDS COME TO judge whether the market is offering housing solu- the newly opened Four Seasons in Madrid. THOSE WHO WALK tions that meet demand-side needs. Compared with many other sectors, the prime Madrid’s historic core encompasses a mosaic residential market has proved remarkably resil- of charismatic neighbourhoods that add value ient to the pandemic’s bite. We will all be hoping to the market not only through their selection of that the coming year sees the economy get back prime properties, but through their unique sense on its feet – and that this sector rapidly regains its 24 Editorial and contents: Knight Frank Research of place and wide array of attractions. It is these pre-COVID vigor. BRANDED RESIDENCES [email protected] 2 3 PRIME RESIDENTIAL 2020-2021 PRIME RESIDENTIAL 2020-2021 OVERVIEW Residential transactions in Madrid over time TRANSACTIONS Y-O-Y SPANISH RESIDENTIAL MARKET 70,000 20% Assuming that the 2021 60,000 10% recovery materialises as 50,000 TRANSACTIONS Knight Frank’s Global Buyer Sentiment Survey Community of Madrid has seen prices climb by 50,000 anticipated, transaction 0% his year, we have all been living through checked in with more than 700 potential buy- close to 30% compared to the historic low re- 40,000 numbers should bounce an unprecedented event, with the global ers across the globe between 5th and 23rd June corded in 2014, although in Q2 the open-market -10% economyT grinding to a standstill and growth 2020, a time where memories of the first lock- price for residential property came in at around 30,000 back by some 20%, both forecasts varying widely between countries. The down were still fresh in their minds. We found €2,590 per sq m, -1.4% short of the 2019 average. -20% 20,000 nationally and in the most recent projections from the International that one of the most prevalent motivations At the national level, we would expect the aver- -25% -30% Madrid market. Monetary Fund* suggest that Spanish GDP will among Spanish buyers was the desire to up- age price to be sitting 8% to 10% lower at the end 10,000 close out 2020 on a contraction of 12.8%, but grade their primary family residence, followed of this year than in 2019. However, 2021 growth 0 -40% with a gradual recovery within its grasp. Growth by the acquisition of a holiday home in a sunny is likely to hit around 6%, as slackening demand 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 should hit 7.2% in 2021, comfortably outpacing climate and access to quality medical care. meets a rise in supply. Forecast the predicted Eurozone average (5.2%). In the Community of Madrid, the final tally Source: Knight Frank Research / INE As for transaction volume, official statistics should reach approximately 50,000 transac- In Q2, the highest growth (relative to his- indicate that Spain posted more than 240,000 tions, almost 40% more than the 2013 low. toric lows for the 2004–2019 period) was completed sales reported in the period to Au- We are optimistic that 2021 will bring a robust posted by the autonomous regions of Ma- gust 2020, a dip of around 25% compared to the recovery, with transaction volume growing by drid, the Balearic Islands, Catalonia and the same period in 2019. By the end of the year, this 20% both in Madrid and at the national level. Canary Islands. In Madrid, prices jumped figure is expected to grow to somewhere in the by nearly 30% compared with the 2014 low, region of 330,000 – down roughly 25–30% year PRICES although the average open-market price for on year. To put this in perspective, this estimate Data from H1 2020 tells us that the average residential property in Q2 fell 1.4% short of is far removed from the levels recorded during price of an open market home in Spain was the 2019 figure at around €2,590 per sq m. the previous crisis; indeed, it’s almost 19% high- around €1,625 per sq m, only slightly lower than Compared to the Spanish market as a whole, er than the final reckoning for 2013. the average price in 2019 (€1,640 per sq m). The we would expect Madrid to trace a smoother path both in decline and recovery, with a slump of around -6% in 2020 giving way to growth of 4% in 2021. Residential transactions in Spain over time TRANSACTIONS Y-O-Y Meanwhile, keep an eye on the residential lettings market, which has weathered the 15% COVID-19 crisis with aplomb; indeed, ren- 500,000 10% tal prices continue to grow in Spain, hitting 5% €11.30 per sq m in October. Among the many 400,000 potential impacts of the pandemic, house- 330,000 0% -5% holds are finding the costs of purchasing 300,000 -10% a home prohibitively expensive, typically -15% requiring an outlay of between 20–30% on 200,000 -20% top of the sales price. This, combined with a labour market where flexibility and mobility 100,000 -25% -30% -30% are increasingly rewarded, is energising let- tings activity, with rental prices in cities like 0 -35% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Madrid reaching €15.70 per sq m by the end of October. Source: Knight Frank Research / INE *Forecasts updated by the IMF in October 2020. 4 5 RESIDENCIAL PRIME 2020-2021 PRIME RESIDENTIAL 2020-2021 Outlook: annual variation Open-market prices*. in price Forecast variation in prime residential property prices Q2 2020 variation from the lowest average price recorded in 2004–2019 Madrid Spain Q2 2020 STRONG GROWTH (5%+) 15% 0% SLIGHT GROWTH (0.1% TO 4.9%) -3% 6% New-build: FLAT OR SLIGHT DIP (0%-4.9%) 10% 12% 6% € 1,900 / sq m STRONG DECLINE (-5%+) Resales: 5% 5% €1,600 / sq m 3% -1% 20% 1% 0% 2021 29% -5% -4% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Auckland Madrid Q2 2020 Cape Town Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 F F -2% 5% 12% New-build: €3,000 / sq m Berlin 34% Shanghai Resales: €2,600 / sq m Geneva Lisbon Source: Knight Frank Research Balearic Islands Q2 2020 -3% London New-build: €2,800 / sq m Los Angeles 7% Resales: €2,300 / sq m Bombay Madrid Dubai Catalonia Q2 2020 Melbourne Hong Kong New-build: €2,300 / sq m Miami PRIME New York Resales: €2,000 / sq m Monaco RESIDENTIAL 44% Paris Ceuta and Melilla Q2 2020 MARKET Sydney New-build: €1,900 / sq m Vancouver Resales: €1,700 / sq m Buenos Aires -10% < X ≤ 0% 20% < X ≤ 30% Vienna night Frank’s Prime Global Forecast sent Q2 prices tumbling, although we should 17% 2021 looked at data from 22 major ci- see a strong recovery in 2021. 0% < X ≤ 10% 30% < X ≤ 40% Canary Islands Q2 2020 Singapore K New-build: €1,700 / sq m ties, including Madrid, to form a view on In Madrid, the performance of the prime 10% < X ≤ 20% 40% < X Resales: €1,500 / sq m where prime residential property prices mi- residential market has been at odds with ght stand at the close of 2021 compared to both city and nationwide trends. Here, the Source: Spanish Development Ministry. *Open-market price, all property types included. where we are now. Based on projections for impact on the average price has been more supply and demand, what we know about muted, owing to sustained demand and the the impacts of the crisis in each market and view that prime Madrid property makes a Spain.