Media coverage of the Spanish housing market has focussed on the oversupplied Costas, but has the luxury market fared any better in the nation's capital? José Manuel Sánchez Rodríguez, head of Analysis and Consultancy at Knight Frank's Madrid office, provides some answers

What impact did the global economic downturn have on Madrid's prime residential market and how has it performed since?

Madrid was less exposed to the global market downturn than the rest of Spain due principally to the lack of new housing supply in the city, a factor that clearly distinguishes it from the rest of the country. The scarcity of new supply is even more evident in Madrid's prime districts. The result of the economic downturn has been to widen the margin between a vendor's asking price and the agreed selling price, and bidding is now more aggressive than ever. We are also realising, as a result of the financial crisis, how closely related the debt market, stock market and property sector are, especially in relation to the luxury residential market.

What areas or urbanisations in Madrid are considered the most desirable and why?

Madrid's most popular prime locations include La Moraleja, Salamanca/Chamberí, La Florida, La Finca and Puerta de Hierro. In terms of the apartment market, Salamanca / Chamberí, which are at the heart of the city, are in most demand due to the amenities on offer.

For those purchasers looking for family homes the more peripheral areas are popular. These provide lower-density housing, reduced traffic, and greener and pedestrian family-friendly zones.

Are there many new prime developments under construction or planned?

New residential projects in peripheral areas tend to be small in size and comprised of only a few units. In Madrid projects like Goya 63 and Hoyo 10 (Moraleja) are both good examples of what is currently available. Another high quality development called Juan Bravo 3 designed by the architect Rafael de la Hoz contains 60 apartments and includes a gym, spa pool, winter and summer theatre, as well as a 24-hour concierge to organise tickets, book travel or provide catering. Projects of this calibre are unprecedented in Spain.

What is the highest price per sq metre achieved in Madrid?

The maximum price achieved for a new-build apartment exceeded €15,000 per sq m (based on the floor area above ground), this would equate to €19,000 per sq m for the internal floor area with parking spaces achieving approximately €120,000 each. However, these record prices were set four to five years ago

How important are overseas buyers to the prime Madrid market and where do the majority of overseas buyers come from?

At present, foreign demand is almost nonexistent, representing around 5% in central Madrid and 0-5% in the outskirts. La Moraleja is the focal point for most overseas purchasers who account for up to 10% of total demand. With such low representation it is difficult to provide a breakdown of nationalities, most will be either be international footballers or senior managers relocating to Madrid for work purposes.

Do overseas buyers have different requirements to Spanish buyers?

There are very few differences between domestic and overseas purchasers in the Madrid prime market. In Spain's coastal markets these variations would be more apparent. Certainly, French purchasers prefer the area near Conde de Orgaz where the French school is located and international footballers favour La Finca.

Does Madrid have a clearly identifiable super-prime market like New York and London or is it evolving?

For some, La Moraleja to the north and La Finca to the northwest with their large homes and sizeable plots, are considered Madrid's super-prime market. However, they are not comparable with the scale and specification of the major projects found in London and New York.

What are the key points buyers are looking for in a luxury Madrid?

In my opinion the most important factor buyers consider is a property's location; be it in the centre of the city to enable residents to take advantage of the city's amenities, its culture and transport, or in the quieter outskirts providing green landscapes, tranquillity and elegant architecture. 

Is there any evidence to suggest that the well-publicised issues affecting the coastal areas of Spain (for example,  the demolition of homes in areas such as La Comunidad de Valencia due to a lack of planning consent) has affected overseas buyers' confidence in the overall Spanish property market? 

Many commentators, partly due to the negative media coverage, believe there is a housing problem on the Valencian coast. I disagree. When a private developer states his intention to regenerate an area in line with the original town plan Spanish residents are equally affected as foreign purchasers. When a developer communicates his intention, there is a process of appeal.

The problem is that many foreign residents provide the authorities with only their Spanish address. If they use the property as a second-home and it is vacant for some time and they have not provided their foreign address to the authorities they are often unaware of the action being taken. 

Despite this negativity many owners do not appreciate that through regeneration the value of their land can often increase by around five or 10 times its present value. This negative coverage is misleading but it does not seem to have deterred German and French buyers who have been particularly active in the market this year.

What is your outlook for the prime market in Madrid in 2011 and 2012 in terms of price performance and market activity?

Sales remain slow but prices have stabilised. Buyers are cautious given the global macroeconomic situation and until there are signs of a real improvement many will postpone investing in residential real estate. In my view only an improvement on the global economic stage will provide the required impetus to generate a recovery in the sales market.

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